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Final Results

24th Dec 2009 07:01

RNS Number : 6872E
Central African Gold PLC
24 December 2009
 



Central African Gold Plc / Ticker: CAN / Market: AIM / Sub-sector: Gold Mining

24 December 2009

Central African Gold Plc ('CAG' or 'the Company')

Final Results

Central African Gold Plc, the AIM quoted gold mining and exploration company, announces its results for the year ended 31 December 2008.

Chief Executive Officers statement

Summary

At the start of 2008 the Company had mining rights in four countries in Africa and had increased its gold resources in both Ghana and Mali However, as the year progressed, it became increasingly necessary to devote virtually all of management's attention to the Bibiani Mine in Ghana ('Bibiani') due to its continual poor operational performance

The Bibiani mine ian old mine, with large reserves of ore and a good treatment plant on the surface.  It was the Company's intention to re-open the mine with an initial injection of capital and thereafter finance further development from the proceeds of gold sales.  However, even by the end of 2007, it was clear that gold production from dump retreatment, opencast and underground mining operations were well below expectations. Reasons for this included the challenges associated with mining an old mine, shortages of electricity and other inputs, a shortage of pre-production development and finally a transport fleet insufficiently robust to move the ore to surface.

In order to fund the poor operational performance and necessary capital expenditure of Bibiani, the Company had to raise additional capital via a loan from Investec Bank to its Ghanaian subsidiary and two equity placements in Central African Gold Plc, the parent company Despite the additional capital expendituremine production of gold did not increase and it was decided to refine the management team.  A new Chief Executive Officer, Roy Pitchford was appointed in November 2008, although by this point the Company's shares had already been suspended from trading on AIM pending clarification of the Company's financial position.

Early in 2009 CAG Ghana received a notice of default from Investec Bank, which held a charge over the entire issued share capital of CAG Ghana, regarding the non-payment of monies due to it. This resulted in Investec Bank becoming the legal owners of Bibiani through its 100 per cent. ownership of CAG Ghana. The Company therefore no longer holds an interest in Bibiani.

Prospecting operations were continuing on a modest scale in Mali. However, iZimbabwethe Company's subsidiaries, Falcon Gold Zimbabwe Limited ('Falgold') and Olympus Gold Mines Limited ('Olympus') were forced to cease operations due to the adverse political and economic climate, principally a hopelessly inadequate system of gold payment by the Reserve Bank of Zimbabwe and chronic shortages of electricity.

Following intensive negotiations on various fronts in March 2009, the Company successfully placed sufficient shares to raise £5.7m. A consequence of this, when allied to the conversion of the loan notes already in issue, was that Emerging Capital Partners LLC held a 50.02 per cent. shareholding in the Company and HBD Zim Investments Limited, a new investor, held a 28.18 per cent. stake in the Company. This cash injection, together with the expected proceeds arising from the sale of the Company's Malian assets, were deemed adequate to satisfy the remaining obligations to Investec Bank and provide the working capital that the Board believed was required for the Company to enhance the value of its remaining assets, especially in Zimbabwe. 

During February 2009, the new Zimbabwe government announced a new scheme to pay for gold sales. Consequently the Company decided to reopen the Dalny and Old Nic mines to test the system in the hope that all Falcon and Olympus mines could be restarted.  Operations to date indicate that the system is working and that realistic prices are being achieved.  In June 2009, the Falcon and Olympus boards agreed to reopen the Golden Quarry and Camperdown mines and the Company is currently in negotiations with a number of parties to raise further funds to cover the initial costs.

The Board's experience remains that Zimbabwe is still a challenging environment in which to operate with ongoing and anticipated electricity shortages a limited supply of skilled labour and very run down plant and equipment.  Furthermore, the country's decision to dispense with the Zimbabwe dollar and use US$ as the legal tender means that there is virtually no history of costs in the 'new' currency.

Once the initial production levels are achieved, plans will have to be put in place, not only to update the plant, but also to increase gold production better to reflect the potential of the extensive gold deposits owned by the Company. 

In concluding this summary I would like to record my appreciation of the hard work and determination with which my fellow Directors have addressed our problems this year. I would like to take this opportunity to apologise to shareholders for the late publishing of this Annual Report and the highly unfortunate circumstances that have arisen.

Detailed comment on the affairs of the company follows:

Zimbabwe 

The Company has interests in two producing entities with extensive claim holdings in Zimbabwe: Falgold (84.7 per cent.) and Olympus (100 per cent.). Between them, these companies have a number of previously operational gold mines. Whilst all production ceased in December 2008, due to the adverse political and economic climate in Zimbabwe, recent reforms by the Government have provided us with the confidence to restart gold production, exploration and development programmes at the Dalny and Old Nic mines which took place in March 2009. Subject to financing, we anticipate bringing Golden Quarry and Camperdown into production during 2010, before developing various other target properties.

Reserves and resources for the Zimbabwean assets are as follows: 

Ore reserve category

Mineral resource category

Category

Kt

Au g/t

Au Koz

Category

Kt

Au g/t

Au Koz

Proven

3,340

2.09

224

Measured

18,882

1.49

903

Probable

8,368

1.50

404

Indicated

7,265

2.68

625

Subtotal M and I

26,147

1.82

1,528

Inferred

2,177

3.88

272

Total reserves

11,708

1.67

628

Total resources

28,323

1.98

1,800

  Mali 

The Company held an 80 per cent. interest in a highly prospective portfolio of 18 properties in Mali. Our portfolio, as at 31 December 2008, spans approximately 2,137 sq km of Birimian strata in west and south Mali at 31 December 2008. At 30 November 2009 this has been reduced to 1,883 sq km. During 2008, work was undertaken at our most advanced project: the 150 sq km Medinandi and Bokolobi permits in the prospective Kenieba district. These permits currently have a combined mineral resource of approximately 500,000 oz of gold grading 4.55g/t Au from the Fadougou Main Zone target. Further reverse circulation ('RC') drilling was also completed at Medinandi. A total of 33 RC boreholes totalling 3,948m were drilled over a number of target areas outside the Fadougou Main Zone.

As at 28 February 2009, the Malian assets had a carrying book value of £3.3 million. Given our decision to focus on our Zimbabwean assets, the relatively early stage of development of the Malian assets and the difficulties of effectively managing them from our head office in South Africa, we took the decision to sell these assets in the short to medium term.

Accordingly, as announced on 21 December 2009, the Company has entered into an agreement to dispose of these assets for a consideration of US$ 4 million (of which $0.6m has been received), with a further US$ 1 million payable on achievement of a JORC compliant indicated and measured gold resource of at least 500,000 ounces.  Completion of this disposal is expected in March 2010.

Botswana 

Our 100 per cent. owned subsidiary, Matoko Limited, held the rights to the 436 sq km Kraaipan prospecting licence in Botswana, which spans the highly prospective Achaean Kraaipan greenstone belt.  

These assets, which had a carrying book value of £nil as at 31 December 2008 (2007: £0.17 million) are under review by the Board, whilst we decide whether to continue the current exploration programme, find a suitable joint venture partner or dispose of them. 

Financial Review

During the period to 31 December 2008, the total loss for the period was £26.5 million (2007: £14.7 million) or a loss of 15.91p per share (2007: loss of 15.31p per share). Administrative expenses were £5.7 million (2007: £9.6 million).

The Company's subsidiary CAG Ghana, held a loan facility with Investec Bank. On 14 January 2009, the Company announced that CAG Ghana had defaulted on payment of monies due on the loan. The security on the loan was the shareholding in CAG Ghana, which owned the Bibiani mine, as well as a $5 million guarantee from Central African Gold Plc, the parent company. Subsequently, Investec took control of CAG Ghana.  A placing was subsequently undertaken in April 2009 to raise £5.7 million (US$ 8.0 million) before expenses to contribute towards the settlement of the parent company guarantee and also to provide working capital for the development of the Company's remaining assets.

As announced on 8 July 2008, the Company also arranged two Convertible Loan Agreements in June and July 2008. By the terms of the convertible loans, the Company borrowed $3.94 million (approximately £2.17 million using the rate of exchange prevailing on the date of the agreement) from Emerging Capital Partners ('ECP') and $3.0 million (approximately £1.67 million, using the rate of exchange prevailing on the date of the agreement) from Investec Asset Management ('IAM').

The Company has agreed with IAM to amend and supersede the terms of the IAM Convertible Loan Agreement so that $1.0 million (being approximately £0.7 million) of the monies lent pursuant to the IAM Convertible Loan Agreement was converted into new Ordinary Shares at 0.9p per share immediately following the Placing. The outstanding amount of $2.2 million (plus interest accruing at a rate of 10 per cent. per annum) was repayable in cash on the earlier of the sale of the Malian assets or 14 April 2010. 

The Company has also agreed with ECP to amend and supersede the terms of the ECP Convertible Loan Agreement so that $2.4 million (being approximately £1.7 million) of the monies lent pursuant to the ECP Convertible Loan Agreement was converted into new Ordinary Shares at 0.9p per share immediately following the Placing. The outstanding amount of $1.8 million (plus interest accruing at a rate of 10 per cent. per annum) is repayable in cash on the earlier of the sale of the Malian assets or 14 April 2010. 

As a result of the IAM and ECP Convertible Loan Agreements, 267,264,079 new Ordinary Shares were issued representing 26.62 per cent. of the Resulting Share Capital. ECP now has a beneficial interest in 50.02 per cent. of the Resulting Share Capital and IAM, associated funds and segregated discretionary portfolios have a beneficial interest in 10.48 per cent. of the Resulting Share Capital. The total number of Ordinary Shares in issue is 1,004,085,968.

IAM and ECP have agreed to further extend the terms of the loans made available to the Company by extending the maturity date of the loans, as described in the March 2009 circular to shareholders, from the earlier of the disposal of Mali or 14 April 2010, to 29 April 2011.

In addition thereto, in December 2009, CAG has entered into new convertible loan agreements with its three major shareholders for a total of $1.25 million. The loan notes mature on 29 April 2011. 

Board 

During the year, a number of changes were made to the Board, in order to build a team with a wide cross-section of expertise and a proven track record to take the business forward.

Roy Lander joined as Chairman of the Company in May 2008 at the same time as Thomas Gibian who assumed a Non-executive Director role. Thomas was appointed as a representative for Emerging Capital Partners LLC, a substantial shareholder in CAG, but stepped down from the position in December and was replaced by Navaid Burney, who had periodically attended meetings as Thomas' alternate, so knew the Company well.

Charles Prentice, Finance Director, stepped down from the Board in July 2008 and Greg Hunter, CEO, resigned in November 2008. Navaid Burney resigned in November 2009. Roy Lander resigned as Chairman in December 2009. We are grateful for their contributions to the Company and wish them every success in the future.

I joined as CEO in November 2008 and following Roy Lander's resignation as Chairman, I will act as Chairman and CEO until such time as a new Chairman has been appointed.

We were also delighted to welcome Craig Campbell to the team who joined first as Chief Financial Officer in September 2008 before being appointed to the Board in December 2008 as Finance Director. 

In November 2009, we welcomed Bryce Fort to the Board who replaces Navaid Burney as Emerging Capital Partners LLC representative.

We reduced the headcount in South Africa and in May 2009 moved our offices to smaller premises. Our team in South Africa now consists of three employees. 

Outlook

After a turbulent start to the year, we are now focused on advancing our assets in Zimbabwe, which we believe offer excellent mid to longer term prospects. The political situation in Zimbabwe remains challenging; however we believe we are seeing the first green shoots of recovery since Morgan Tsvangirai's appointment as Prime Minister in February 2009. The substitution of U.S. dollars and other hard currencies for the Zimbabwean dollar seems to have vanquished hyperinflation and the recent World Bank grant, its first to Zimbabwe since 2001, all point to an improvement in operational conditions. With this in mind, our immediate aim is to move into a cash positive position and then expand production at our Zimbabwe mines. Eventually we will look at the wider portfolio of existing assets with a view to enhancing their value and potentially take advantage of our first mover position in the country to acquire additional projects.

Finally, I would like to thank shareholders for their patience and continued support as well as the efforts of our streamlined team as we look to grow the business once more and deliver value to shareholders.

Roy Pitchford

Acting Chairman and Chief Executive

23 December 2009

Board of Directors 

The board of directors comprises:

Roy Pitchford (57)

CEO and executive director

Roy has more than 20 years' senior management experience and executive experience in Southern Africa, 13 years of which were in the mining industry.  He was CEO of Cluff Resources Zimbabwe Limited, Delta Gold Zimbabwe (Pty) Limited, and more recently African Platinum plc.

Bryce Fort (30)

Non-executive director

Bryce is a Managing Director and founding partner of Emerging Capital Partners and has a wealth of experience managing private equity funds and overseeing investment banking activities. He serves on the board of various companies.

Craig Campbell (39)

CFO and executive director

Craig is a South African chartered accountant with over 12 years of financial experience predominantly within the mining arena.  Most recently he served as chief financial officer and executive director of a diamond exploration and mining company.  During this time he had substantial exposure to the development of significant exploration projects, corporate governance and corporate finance, where he was instrumental in closing and implementing the C$100 million merger between BRC Diamond Core and Diamond Core.  Additionally, Craig has held other financial directorships and financial management positions for various companies, including BRC Diamond Core and Diamond Core, as well as companies operating in the retail and manufacturing sectors.

Group Reserves and Resources

 

Central African Gold uses the Australian Code for the Reporting of Mineral Resources and Ore Reserves (JORC) of the Australian Institute of Mining and Metallurgy (AIMM), which sets out the internationally recognised procedures and standards for the reporting of ore reserves and mineral resources in Australia, and is recognised as a recommended guideline for reserve and resource reporting for companies listed on AIM.

The JORC code also recognises the South African Mineral Resources Code (SAMREC) and South African Council for Natural Scientific Professions (SACNASP) on a reciprocal basis.

Definitions as per the JORC code

Mineral resources

A mineral resource is a concentration (or occurrence) of material and economic interest in or on the earth's crust in such form, quality and quantity that there are reasonable and realistic prospects for eventual economic extraction.  The location, quantity, grade, continuity and other geological characteristics of a mineral resource are known, estimated from specific geological evidence and knowledge, or are interpreted from a well-constrained and portrayed geological model.  Mineral resources are sub-divided in order of increasing confidence in respect of geoscientific evidence into inferred, indicated and measured categories.

An inferred mineral resource is that part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence.  It is inferred from geological evidence and assumed but not verified geological and/or grade continuity.  It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be limited or of uncertain quality and reliability.

An indicated mineral resource is that part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence.  It is based on exploration, sampling and the testing of information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.  The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.

A measured mineral resource is that part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence.  It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.  The locations are spaced closely enough to confirm geological and grade continuity.

Ore reserves

An ore reserve is the economically mineable material derived from a measured and/or indicated mineral resource. It is inclusive of diluting materials and allows for losses that may occur when the material is mined. Mineral reserves are subdivided in order of increasing confidence into probable mineral reserves and proven mineral reserves.

The probable ore reserve is the economically mineable material derived from the indicated mineral resource. It is estimated with a lower level of confidence than a proven mineral reserve, is inclusive of diluting materials and allows for losses that may occur when the material is mined.

The proven ore reserve is the economically mineable material derived from the measured mineral resource and is estimated with a high level of confidence.  It is inclusive of diluting materials and allows for losses that may occur when the material is mined.

Central African Gold reporting in compliance with JORC

In order to meet the requirements of the JORC code that the material reported as a mineral resource should have "reasonable and realistic prospects for eventual economic extraction", CAG has determined an appropriate cut-off grade which has been applied to the quantified mineralised body according to a process incorporating the following parameters:

the life-of-mine plan, which currently is based on the depletion of ore reserves and 40% of the measured and indicated mineral resources;

a consensus derived gold price (in US$ per ounce); and

appropriate consideration of mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors in terms of the modifying factors for the conversion of mineral resources to ore reserves.

By applying this process, CAG used a gold price of $750 per ounce of gold to derive an appropriate pay limit for ore reserves (variable for each deposit), and a cut-off grade for mineral resources which provides an in-situ grade above cut-off that exceeds the pay limit for that deposit.

Mineral resources have been estimated on the basis of geoscientific knowledge with input from the Company's mineral resource geologists.  Each operation's mineral resources are categorised, blocked-out and ascribed an estimated value.

Competent persons

The ore reserves and mineral resources have been prepared under the guidance of the Company's competent persons who are duly registered with the South African Council for Natural Scientific Professions (SACNASP) and the Geological Society of South Africa (GSSA).  SACNASP and GSSA are recognised by the Australian Institute of Mining and Metallurgy (AIMM) as organisations to which competent persons must be affiliated.

The Company's competent persons took into account the definitions in the JORC code, and the ore reserves and mineral resources quantities reported here are considered to be fully compliant in all material respects.  The competent persons had over 30 years' experience in the evaluation and resource estimation of gold deposits. The Company does not have a competent person as defined. These roles were fulfilled previously by:

P.N. Bentley (M.Sc., M.Sc. (Minex), Pr.SCI.Nat. 400208/05, GSSA 40866)

D. Richards (BSc. Hons. (Geo.), GDE (Min. Eng.), Pri. Sci. Nat.)

F. Dooge ( BSc (Hons), Pr.SCI.Nat. 400003/86)

  

Auditing

Independent consultant Snowden Mining Consultants (Snowden) audited the CAG ore reserves and mineral resources as part of the September 2006 readmission document.  Advice has subsequently been taken from Snowden for subsequent mineral resource statements. Ore reserves have been erected based on Ukwazi Mining consultants' mine planning and scheduling studies.

Ore reserves and mineral resources

During 2007 the Company undertook ore reserve and mineral resource estimations on properties in Ghana, Mali and Zimbabwe.  These estimations are a part of an evolving process, and methodology varies from

computerised three-dimensional geology and orebody modelling, with geostatistical estimation of mineral resources and ore reserves as at Bibiani mine, Ghana;

manual polygonal estimation of non-computerised ore block and development plans as at the Falgold operations in Zimbabwe; and

computerised mineral resource estimation of exploration drilling data, as at Medinandi in Mali and Bibiani in Ghana.

The consolidated ore reserves and mineral resources for the group, excluding Ghana, following its divestment in January 2009, are given below. As per JORC guidelines, the ore reserves are reported as a modified subset of the mineral resource estimate, and reflect appropriate modification to account for dilution, pillars, mining losses and mine call factors.

Pay limits have been erected for each operation, and incorporate fixed and variable working costs, metallurgical recoveries and mine call factors. The economic viability of the ore at a gold price of US$750 per ounce of gold mineral resources has a stated cut-off of 1.00g/t gold at Falgold.  The cut-off grade for the resources reflects that grade above where the average grade of ore exceeds pay limit, and is generated by creating a grade: tonnage curve for all the mineral resources.

The Falgold operations produce gold from a variety of ore sources and metallurgical flow processes, for example, tailings/slime retreatment, underground hard rock, and oxide opencast that is milled or heap leached.

Group consolidated ore reserves and mineral resources

Attributable and consolidated reserves and resources now owned by the Company are shown below:

Ore reserves

Mineral resources

Mineral asset

Equity %

Total

Au Koz

Attributable

Au Koz

Total

Au Koz

Attributable

Au Koz

Falcon Gold

85

388

329

1,165

986

Olympus

100

240

240

364

364

Medinandi

80

-

-

505

404

628

569

2,034

1,754

  The following summarises the reserves and resources now owned by the Company. The reserves and resources of the Bibiani gold mine in Ghana are no longer considered relevant to the Company since the forced divestment of CAG Ghana on 14 January 2009. 

Falgold, Zimbabwe

The Falgold operations comprise two producing mines Dalny and Old Nic, and three mines, Venice, Camperdown and Golden Quarry, currently on care and maintenance.  When CAG acquired the Falgold and Olympus assets, reserve and resource estimations existed for the properties, although they were not JORC compliant.  An initial re-categorisation of the reserves and resources was undertaken late in 2006 as part of an independent competent person's report which formed part of the due diligence on the assets.

The revised Falgold statement is now JORC compliant.  Estimations are polygonal, and are generated from mine plans and block listings, and categorised according to the degree of development/availability for mining and economic viability.  Pay limit calculations have been revised for each facet of each operation, and, due to the hyperinflationary economic environment, have been erected to enable normalisation of operating costs to US$ using the Imara Edwards Old Mutual exchange rate.  The pay limits also include a factor (70%) to include the reduced gold revenue received due to the Zimbabwe fiscus (65:35 US$: Zim$ for gold sales, where the price received is 65% of US$ spot plus 35% spot converted at a Zim$ rate/gram). 

The categorisation of proven reserves is included, but any interested party should be aware that it is 'sensu stricto' difficult, given the uncertainty of actually being paid the US$ component of revenue into a foreign currency account by the Zimbabwe government, to ascertain the 100% economic viability of proven reserves.  Downgrading of these ore reserves to probable status may be warranted and is being monitored by CAG.

CAG has initiated the electronic capture of orebody data for Dalny and Camperdown projects, which have been prioritised for expansion studies.

Medinandi project, Mali

The mineral resources currently established at Medinandi were estimated subsequent to a phase of RC drilling conducted by CAG during Q1 and Q2 2007, combined with three shallow drilling programmes conducted by previous workers.  The ore zones have largely been classified as inferred mineral resources due to complex structure and uncertainty in some areas of the geological continuity of mineralised zones. Further drilling was halted in Q3 2008.  

Zimbabwe

Ore reserve category

Mineral resource category

Proven

Kt

Au g/t

Au Koz

Measured

Kt

Au g/t

Au Koz

Ug blocks

584

2.74

52

Ug blocks

2,460

3.47

274

Ug pillars

1,040

2.25

75

Ug pillars

2,778

3.20

286

Subtotal ug

1,624

2.43

127

Subtotal ug

5,238

3.33

560

Open pit milling

871

1.95

55

Open pit milling

845

2.10

57

Open pit heap leach

379

0.72

9

Open pit heap leach

379

0.79

10

Slimes/tailings dumps

466

2.27

34

Slimes/tailings dumps

12,420

0.69

276

Subtotal surface

1,716

1.76

98

Subtotal surface

13,644

0.78

343

Total proven

3,340

2.09

225

Total measured

18,882

1.49

903

Ore reserve category

Mineral resource category

Probable

Kt

Au g/t

Au Koz

Indicated

Kt

Au g/t

Au Koz

Ug blocks

2,025

3.19

207

Ug blocks

4,160

3.54

473

Ug pillars

327

5.04

53

Ug pillars

616

1.91

38

Subtotal ug

2,352

3.44

260

Subtotal ug

4,776

3.33

511

Open pit milling

658

1.94

41

Open pit milling

686

2.00

44

Open pit heap leach

-

-

-

Open pit heap leach

-

-

-

Rock dumps

1,758

1.17

66

Rock dumps

7

1.21

-

Slimes/tailings dumps

3,600

0.32

37

Slimes/tailings dumps

1,797

1.21

70

Subtotal surface

6,016

0.76

144

Subtotal surface

2,490

1.43

114

Total probable

8,368

1.50

404

Total indicated

7,266

2.68

625

Total reserves

11,708

1.67

629

Total M and I

26,148

1.82

1,528

Inferred

Kt

Au g/t

Au Koz

Ug blocks

1,670

4.35

234

Subtotal ug

1,670

4.35

234

Open pit milling

507

2.34

38

Rock dumps

-

-

-

Subtotal surface

507

2.34

38

Total inferred

2,177

3.88

272

Total resources

28,325

1.98

1,800

Mali

Ore reserve category

Mineral resource category

Kt

Au g/t

Au Koz

Kt

Au g/t

Au Koz

Proven

-

-

-

Measured

-

-

-

Probable

-

-

-

Indicated

341

4.25

47

Inferred

3,111

4.58

458

Total reserves

-

-

-

Total resources

3,452

4.55

505

Corporate Governance Statement

The board of directors is accountable to the Company's shareholders for good corporate governance and the directors support the Combined Code as far as it is appropriate to the group's stage of development.  Whilst not mandatory for an AIM company, the directors have implemented, where practical for a company of this size and nature, the main provisions of the principles of good governance and code of best practices.

The board has also considered the guidance published by the Institute of Chartered Accountants in England and Wales concerning the internal control requirements of the Combined Code, in line with the Turnbull Report.  The board regularly reviews key business risks, via a number of properly constituted committees, in addition to the financial risks facing the group in the operations of the business.

The board of directors

The Company is led and controlled by a board comprising two executive directors and a number of non-executive directors.  In May 2008, three additional directors were appointed, namely Roy Lander (newly appointed independent non-executive chairman), David Glennie (independent non-executive director) and Thomas Gibian (non-executive director). Navaid Burney was appointed as Thomas Gibian's alternate director. 

In July 2008, the Company's chief financial officer, Charles Prentice, resigned.  David Glennie resigned in November 2008. In December 2008, Thomas Gibian resigned and Navaid Burney was appointed as a non-executive director. Craig Campbell, appointed as the Company's chief financial officer in September 2008, was appointed to the board in December 2008.

Navaid Burney succeeded Tom Gibian as a non-executive director in December 2008. In December 2009, Bryce Fort was appointed as a non-executive director to fill the role vacated by Navaid Burney.

There are no matters specifically reserved to the board for its decision although effectively no decision of any consequence is made other than by the directors.  Board meetings are held when required.  All directors participate in the key areas of decision making, including the appointment of new directors.  There is no separate Nomination Committee due to the current size of the board.

The board receives timely information on all material aspects about the group to enable it to discharge its liabilities.

While all directors have equal responsibility in law for managing the Company's affairs, it is the role of executive management to run the business within the parameters laid down by the board and to produce clear and accurate reports to enable the board to assess their performance.  The executives make full use of the expertise and experience that the non-executive directors bring from their business careers.

There is no agreed formal procedure for the directors to take independent professional advice at the group's expense.

All directors submit themselves for re-election at the Annual General Meeting (AGM) at regular intervals.  There are no specific terms of appointment for non-executive directors.

A Technical Committee was established comprising Roy Pitchford (chairman) and Roy Lander.  The technical committee did not meet during the year. 

  Director remuneration

The Company established a Remuneration Committee, chaired by David Glennie and assisted by Thomas Gibian. The remuneration committee did not meet during the year. There is currently no remuneration committee due to the current size of the board. The chairman is responsible for the consideration and approval of terms of service, remuneration, bonuses, share options and other benefits of the other two directors and they, in turn, are responsible for his, all decisions are made after giving due consideration to the size and nature of the business and the importance of retaining and motivating management.

All directors have service contracts with the Company.

Accountability and audit

The Company has established an Audit Committee, which met once in 2008 and once in 2007.  The Audit Committee was chaired by Roy Pitchford until his appointment as chief executive officer and comprised David Glennie and Roy Lander.  There is currently no audit committee due to the current size of the board. The chairman and chief financial officer are responsible for reviewing the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditors.  A formal statement of independence is received from the external auditor each year.

Relations with shareholders

The chairman and chief executive officer are the Company's principal spokespeople with investors, fund managers, the press and other interested parties.  At the AGM, private investors are given the opportunity to question the board.

Internal control

The board acknowledges its responsibility for establishing and maintaining the group's systems of internal control. Although no system of internal control can provide absolute assurance against material misstatement or loss, the Company's systems are designed to provide the directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately.

The key procedures that have been established and which are designed to provide effective control are as follows:

Management structure - the board meets when required to discuss all issues affecting the group

Investment appraisal - the group has a framework for investment appraisal, and approval is required by the board where appropriate

The board reviews the effectiveness of the systems of internal control and considers the major business risks and the control environment.  No significant control deficiencies have come to light during the period and no weakness in internal financial control has resulted in any material losses, contingencies or uncertainties which would require disclosure as recommended by the guidance for directors on reporting on internal financial control. 

Going concern

Having made appropriate enquiries and having examined the major areas which could affect the group's financial position, the directors are satisfied that the group has adequate resources to continue in operation for the foreseeable future.  For this reason and as set out in Note 1 to these financial statements, they consider it appropriate to adopt the going concern basis in preparing the financial statements.

Directors Report 

The directors submit their report and the financial statements of Central African Gold Plc ("CAG" or "the company") for the year ended 31 December 2008.

Principal activities

The principal activities of the group during the year were those of gold exploration, mining, investment and development.

Review of the business and future developments

The year under review was not without its challenges.

In Ghana, a number of initiatives were undertaken during the first half of 2008 with a view to increasing the production tonnages and recovered grades at Bibiani.  In June 2008, the Company contracted an affiliate of Barminco to sink a second decline to access the ore body and achieve ramp‐up to an initial 100,000 tonnes per month ("tpm") target more quickly than CAG could achieve on its own.

 

Development of the Company's mine at Bibiani continued to lag behind its planned schedule with a consequential shortfall in gold production compared with budget.  This, in conjunction with ongoing capital expenditure, utilised the cash resources of the group and resulted in an accumulation of trade payables.

The operations at Bibiani had an immediate requirement for funding in order to provide it with the cash resource necessary to settle the accumulated trade payables, and to fund operational expenses and mine optimisation of the existing shaft over the period until production reached a satisfactory level and generated positive net cash flows, which was expected in August 2008.

The Company's future viability was dependent on achieving acceptable performance levels from the existing decline shaft and a second decline shaft at Bibiani.  The second decline shaft was scheduled to be operational in January 2009.  The purchase of a new mining fleet was anticipated to have a marked improvement on output for the remainder of 2008, and into 2009.

On 8 July 2008, the board announced that, in addition to $6.94 million raised from ECP and Investec Asset Management in the form of convertible loan agreements, the Company required a further $10.0 million of funds, which it intended to raise via an equity placing to be undertaken in August 2008.  It also identified additional sources of funding in the form of an overdraft facility of $1.0 million and lease finance of equipment at Bibiani of $1.5 million, which the directors had no reason to believe would not be forthcoming.

However, on 25 September 2008, in the interim results statement of the company for the period ended on 30 June 2008, the board announced that, as a result of the general market turbulence, including a volatile gold price and weak and deteriorating equity markets, the board had decided to conduct a more wide ranging review of funding options, including examining options for a capital injection aimed at maximising shareholder returns. Unfortunately, the board was unable to identify a suitable option and, on 12 November 2008, the company's shares were suspended from trading on AIM pending clarification of the Company's financial position and the requirement for further short and medium term funding to enable the company to continue operating.

Following this announcement, Greg Hunter, the then chief executive of the Company, resigned and the role of chief executive was assumed by Roy Pitchford, one of the then non executive directors, who had served on the board since January 2004.

On 4 December 2008, the Company announced that, in common with a number of other mining operators in Zimbabwe, its subsidiaries had ceased all operations in Zimbabwe due to the adverse political and economic climate, but the group would continue to maintain its assets there, to the extent practicable.

On 14 January 2009, the company's wholly owned subsidiary, Central African Gold Ghana Limited, received a notice of default from Investec Bank in regarding the non-payment of monies due on the Investec Bank project loan facility agreement (the "PLFA") and the non-payment of monies due under various gold forward transaction agreements (the "HFA") with Investec Bank. Investec demanded a full repayment of more than $20 million from the company.

In addition to the demand for repayment, Investec invoked its power of attorney under the charge over the company's shares in the Central African Gold Ghana Limited and transferred the 90,000 shares in CAG Ghana to Investec Bank, making it the legal owner of Bibiani.

Faced with the prospect of liquidation, the board assessed the company's remaining assets and, with the continued support of the company's major shareholder, decided to focus its efforts on the Zimbabwean assets. A settlement agreement was entered into between the company and Investec Bank which limited the company's liability to $5 million. Pursuant to this, the company announced that subject to shareholder approval, CAG proposed to raise $8.0 million (before expenses) and to proceed with the partial conversion of the convertible loan notes issued in July 2008.

Shareholder approval was sought and received for an increase in the authorised share capital to accommodate the issue of 565,970,992 new ordinary shares at 1.00 pence (the "Placing") and to issue shares at 0.9 pence per share in respect of the partial conversion of the loan notes (the "Conversion").  The net proceeds of approximately £5.7 million before costs were used predominantly to settle the outstanding liability to Investec Bank.

Investor confidence and fund raising

At the end of 2007, CAG announced that subject to shareholder approval, the Company proposed to raise £15.6 million (before expenses) through the issue of 60,000,000 new ordinary shares at a price of £0.26 per share. This was duly approved at an extraordinary general meeting ("EGM") in early January 2008 and the funds raised together with the additional flexibility provided by the extension to the Company's existing debt facility, secured in November 2007, were designated to fund the development of CAG's African production and exploration portfolio in Ghana, Mali, Zimbabwe and Botswana.

The much slower than anticipated build up in production of Bibiani placed considerable pressure on the cash resources of the group during 2008 and the board of directors identified a need to raise further capital to support operations.  Immediate support was offered by two significant shareholders who agreed to advance US$6.94 million in the form of convertible notes with a 6-month term and the issue of US$1 million of new ordinary shares. The Company announced that it would seek to raise an additional US$10 million via an equity placing in the third quarter of 2008.

Negotiations at Central African Gold Ghana for an overdraft facility of US$1 million and lease finance for mine equipment (US$3.5 million) were ultimately not successful.

In April 2009, the company raised $8 million before expenses which was primarily used to settle the liability to Investec Bank of $5 million in terms of the settlement agreement entered into.

KPI's

The Company previously reported that it would use 2008 as the reference (base) year, through the capitalisation of its various development and exploration projects, to initiate a KPI system aimed at helping CAG measure its performance on an annual basis.  This was regrettably not achieved but it is anticipated to be implemented as part of the development of the Zimbabwean mines.

  

Financial Results

Turnover in the year was £14.1 million (2007: £11.0 million) from the sale of 32,250 (2007: 33,637) ounces of gold.

Administrative expenses totaled £5.7 million (2007: £9.6 million).  The total operating loss for the period was £15.9 million (2007: £14.7 million).  The poor operating result was primarily the result of lower than budget production from tailings operations and a slower than expected build up of production from underground at Bibiani.

The carrying value of assets at Bibiani was impaired by £14.45 million (2007: £nil) resulting in a loss for the year of £26.534 million or a loss of 15.91p per share (2007: 15.31p).

The results for 2008 reflect the movement in the "fair value of the gold agreement" of £0.2 million (2007: £3.8 million) applying a gold price of US$866.55/oz at 31 December 2008 (2007: US$833.20/oz).  This arises as a result of the gold sale agreement which was entered into as part of the US$25 million loan facility taken out with Investec Bank Limited in 2007.  At 31 December 2008, the gold sale agreement reflected a cumulative mark to market loss of £3.8 million (2007: £6.9 million) by reference to a gold price at the time of US$866.55/oz. 

The results also reflect a share‐based payment charge of £0.76m (2007: £2.2m).

The group reported in 2007 that the functional currency of the Zimbabwean entities had been deemed to be US dollars. Where transactions had occurred in Zimbabwe dollars, the results and assets were translated using the Old Mutual Implied Rate.  The Old Mutual Implied Rate was used rather than the official rate, since the Company believed that the Old Mutual Implied Rate gave a more accurate representation of the purchasing power of the Zimbabwean dollar.  All trade on the Zimbabwean Stock Exchange ceased in November 2008 rendering the Old Mutual Implied Rate obsolete.  The rate of inflation in Zimbabwe reached extraordinary levels to the extent that inflation indices were outdated as soon as they became available.  When inflation indices were available, there was a high level of subjectivity with respect to measurement, resulting in inflation measures that varied considerably depending on the methods applied and the inputs into the inflation measurement model. Inflation adjusted financial statements were considered unreliable in the circumstances.

Transactions in local currency were based on a pricing criteria that was dependent on the method of settlement, that is, depending on whether the transaction was settled in cash, by bank transfer, by cheque or in kind.  The accumulation of transactions settled by different modes of payment produces annual results that are misleading, and would also have an effect on inflation adjusted financial statements.

Given the current economic situation in Zimbabwe coupled to the decision to suspend operations in early December 2008, the directors have to apply considerable judgment in assessing the recoverable amount of goodwill and other assets in Zimbabwe.  The directors have assessed that no impairment of the overall asset value is required.

  Financial position post Ghana

The board of directors considers that in light of the divestment of the Ghana subsidiary, settlement of the guarantee to Investec and the share placement, it would be useful for shareholders to understand the balance sheet position reported at 31 December 2008 as if these events had taken place on 31 December 2008:

In thousands of pounds sterling

Balance sheet

CAG Ghana divestment

Net proceeds of capital raise

Settlement of  guarantee

Total

Non current assets

42,270

(31,703)

10,567

Current assets

2,455

(2,028)

427

Cash

3,048

(2,781)

5,400

(3,562)

2,105

Total assets

47,773

(36,512)

5,400

(3,562)

13,099

Equity

(3,714)

3,150

(5,400)

(5,964)

Non current liabilities

(7,267)

6,616

(651)

Current liabilities

(36,792)

26,746

3,562

(6,535)

Total liabilities

(44,059)

33,362

3,562

(7,135)

Total equity and liabilities

(47,773)

36,512

(5,400)

3,562

(13,099)

Notes:

The disposal of Ghana reflects the disposal of the net liabilities of Central African Gold Ghana Limited.

The proceeds of the capital raise have been included after the deduction of costs. 

The liability of $5 million, plus interest in terms of the guarantee, was settled.

 

  

Going Concern

The financial statements are prepared on a going concern basis, which is considered in more detail in the basis of preparation in note 1 of the financial statements.

The Directors believe this to be appropriate for the following reasons:

The repayment of interim funding advanced during the period leading up to the capital raise has been deferred by the company's major shareholder.

CAG has disposed of its Mali assets as announced on 21 December 2009 for a consideration of $5 million.

The Company has no significant debt repayment obligations in the short term. The liability to Investec Bank has been settled. Repayment of the convertible loan notes, deferred until the sale of the Mali assets or April 2010, whichever is the earlier, has been deferred to April 2011.

The major shareholders have committed additional funding to the Company in the form of new convertible loan notes.

Management has prepared projected cash flow information for the period ending twelve months from the date of the board's approval of the financial statements.

Cash resources at the date of reporting are sufficient to maintain the corporate overhead structure as well as to make limited investment in Zimbabwe.  Operating costs have been minimised to the extent possible.

The remaining funds after settlement of the liability to Investec Bank are being used in the enhancement in value of the Company's remaining assets.

On the basis of this cash flow information, the directors consider that the company will be able to continue in operational existence for the foreseeable future. However, beyond this period of time, the Company requires additional funding. The directors are currently examining a number of initiatives for developing the Company in the short to medium term. The financial statements do not include any adjustments that might result from the basis of preparation being inappropriate. 

Ghana

A number of initiatives were undertaken in Ghana with a view to increasing production tonnages and recovered grades.  Work commenced on the sinking of a second decline to access the orebody and achieve ramp up to an initial 100,000 tonnes per month target more quickly than CAG could achieve on its own.

Development of the Bibiani mine continued to lag behind schedule with a consequential shortfall in gold production compared with budget.  This, in conjunction with ongoing capital expenditure, continued to utilise the cash resources and resulted in an accumulation of trade payables.

The directors reported that the future viability of the Company was dependent upon achieving acceptable performance levels for the existing decline shaft and a second decline shaft.  As the expected decline shaft was only expected to be operational in January 2009, the directors took the following steps to improve the immediate production at Bibiani:

3 new trucks were purchased to increase the fleet to 9, which trucks were expected to be on site in July 2008.

2 new loaders were ordered and were anticipated on site by September 2008, bringing the total fleet size to 7.

A letter of intent was signed with Barminco to develop the second decline shaft.

Management consultants were retained to introduce short interval controls to improve upon production efficiencies.

The Company continued to seek resolution of the liquidity issues, culminating in a site visit with representatives from its major shareholder and Investec Bank to the Bibiani mine in December 2008.  A number of meetings were held with the key stakeholders and creditors to the Company.

However, on 14 January 2009, Investec Bank demanded the repayment of the project finance facility in full and notified CAG that it had exercised its power of attorney in respect of the charge over the shares in CAG Ghana, making it the legal owner of the Bibiani mine.

Zimbabwe

The Company is the majority owner of two subsidiaries in Zimbabwe: Falcon Gold Zimbabwe Limited ("Falgold") (84.7 per cent.) and Olympus Gold Mines Limited ("Olympus") (100 per cent.).  Falgold and Olympus between them include a number of previously operational gold mines and extensive claim holdings. However, all production ceased in December 2008 due to the adverse political and economic climate in Zimbabwe and related issues at the four mines owned by the Company.

On 2 February 2009, the Governor of the Reserve Bank of Zimbabwe ("RBZ") released a Monetary Policy Statement ("MPS"). The proposed changes detailed in the MPS are far reaching and the directors believe they may potentially, if actioned as described, have a significant and positive impact on the Company's ability to resume its Zimbabwe gold mining operations in the near term. Amongst other changes, the MPS contemplates specific improvements for gold producers that are designed to counter the factors that contributed to the Zimbabwe gold sector decline over the last 18 months.  Under the MPS, the proposed changes include:

permitting gold producers, after receipt of a Gold Export Permit, to be in control of their gold sales: gold companies will be able to produce and sell gold and be reasonably assured that they will be paid for their bullion within normal trade terms, as such gold production may be marketed outside of the control of the RBZ. This is one of the most significant changes in the MPS;

permitting gold producers to retain 92.5 per cent. of their sales in foreign exchange (increased from the previous level of 85 per cent.). These funds may be held indefinitely, as compared to the previous requirement to convert any remaining foreign exchange to local Zimbabwe currency within thirty days of receipt;

giving gold producers the freedom to access certain financial instruments, such as gold loans from offshore markets, that would then be collaterised by their own physical gold inventory, thus, in the opinion of the board, making access to operating capital and new project financing significantly easier; and

converting all current outstanding receivables owed to gold producers, such as CAG, into a "Special Tradable Gold-Backed Foreign Exchange Bond", which will have a term of 12 months and will pay interest at eight per cent. per annum upon maturity. The interest owed is to be accrued from the time that the money has been outstanding and the RBZ will honour the full principal plus interest on maturity.

Furthermore, the RBZ has laid out certain measures to significantly de-regulate Zimbabwe's exchange control policies.  These measures include the ability of gold producers to pay for goods and services offshore, as well as all genuine external debts and dividends without prior Exchange Control approval. The directors believe that this step should, if actioned, make the flow of operational capital more efficient, and allow for the unfettered transfer of operational proceeds.

The directors believe that these reforms, together with political changes in Zimbabwe, including, inter alia, the agreement by all parties in February 2009 to establish a Government of National Unity, should enable the Company to restart gold production in Zimbabwe relatively quickly following the completion of the Placing.

In the medium to long term, the directors believe that CAG may, subject to financing availability, amongst other factors, be in a position to act as a consolidator for other Zimbabwean producing assets.

Mali

The Company has an 80 per cent. interest in 11 permits in southern Mali and seven permits in western Mali through its subsidiary companies Mali Goldfields SA and SonghoÏ Resources SA, the remaining 20 per cent being owned by the Malian Government. This highly prospective portfolio of 18 properties spanned approximately 2,137 km2 of Birimian strata at 31 December 2008.

The most advanced projects are on the 150 km2 Medinandi and Bokolobi permits (held by SonghoÏ Resources SA) in the prospective Kenieba district, which together currently have a combined mineral resource of approximately 500,000 oz of gold grading 4.55g/t Au at the Fadougou Main Zone target. During 2008, further reverse circulation ("RC") drilling was completed at Medinandi. A total of 33 RC boreholes for 3,948m were drilled over a number of target areas outside the Fadougou Main Zone. 

In view of the board's desire to focus on the Company's Zimbabwean assets, the relatively early stage of development of the Malian assets and the difficulties of effectively managing the Malian assets from the Company's office in South Africa, the board decided to sell the Malian assets in the short to medium term in order to augment the group's working capital and specifically to generate funds to satisfy the liability totaling US$4.01 million owed to Investec Asset Management and ECP Africa together under the new convertible loan agreements, details of which are set out in the section entitled 'Convertible Loan Agreements' below.

Accordingly, as announced on 21 December 2009, the Company has entered into a binding agreement to dispose of its 80 per cent. equity interests in each of Mali Goldfields SARL and Songhoï Resources SA (together 'the Malian Assets') ('the Disposal') to Prairie Downs Metals Limited ('Prairie Downs') ('the Agreement') for a total consideration of US$5.0 million ('the Consideration'). As at 31 December 2008, the Malian Assets, which are early stage gold exploration assets, consisting of 18 prospective permits spanning circa 2,137km² of the Birimian strata, were recorded as having a book value of £3.8 million.

The Consideration is made up of an initial non-refundable payment of US$0.5 million in cash, which was paid on signing of the Agreement, and a further US$3.5 million payable in cash to the Company on completion of the Disposal ('Completion'). A further US$1.0 million will be payable to the Company in cash upon the achievement of a JORC compliant indicated and measured gold resource of at least 500,000 ounces.

 

Completion must occur on or before 3 March 2010 and is subject to, inter alia, shareholder approval. A Circular containing notice of the General Meeting will be sent to shareholders for approval shortly. The time between signing the Agreement and Completion will also be used by Prairie Downs to raise sufficient funds to satisfy the Consideration and to seek shareholder approval for the necessary issue of equity.

Botswana

The Company owns a 100 per cent. interest in Matoko Limited, which holds the rights to the Kraaipan prospecting licence. The permit area overlies the north-westward strike continuation of the Archaean Kraaipan greenstone belt from South Africa. The licence is underlain by the extension of the eastern arm of the Archaean Kraaipan greenstone terrain into southern Botswana. The Prospecting Licence over 436 sq km was renewed in July 2007 for two years (after a 50 per cent. surface area reduction) and is renewable again in July 2009 for a further period of two years with a further area reduction of 50 per cent. The Botswana assets had a carrying book value of £0.4 million (approximately $0.56 million) as at 28 February 2009.

The board intends to review the exploration programme in Botswana and will decide whether to continue the programme through its subsidiaries, find a suitable joint venture partner or to dispose of the Botswana assets.

  Dividends

The results of the group appear in detail in the financial statements.  The directors do not recommend paying a dividend (2007: nil).

Directors

The following directors have held office during the year under review and up to the date of this report:

RP Lander (Non Executive Chairman)

appointed 5 May 2008

RA Pitchford (Chief Executive Officer)

appointed on 12 November 2008

resigned as non-executive director 12 November 2008

B Fort (Non Executive Director)

appointed 13 November 2009

CI Campbell (Chief Financial Officer)

appointed 15 December 2008

N Burney (Non Executive Director)

appointed 15 December 2008

resigned 13 November 2009

T Gibian (Non Executive Director)

resigned 15 December 2008

appointed 8 May 2008

D Glennie (Non Executive Director)

resigned 12 December 2008

appointed 5 May 2008

GD Hunter (Executive Director)

resigned as Chief Executive Officer 12 November 2008

resigned as Chairman 5 May 2008

CMW Prentice (Executive Director)

resigned as Chief Financial Officer 1 July 2008

Substantial shareholdings

The Company has been notified of the following substantial interests as at 25 November 2009:

Number of ordinary shares of 0.5p each

Percentage of shares of 0.5p each issued share capital

Emerging Capital Partners LLC

502,242,493

50.02

HBD Zim Investments Limited

282,985,496

28.18

Investec Asset Management

105,184,269

10.48

Cipher 06 Llc

18,343,100

1.83

Thomas Kaplan Family

7,000,000

0.70

Pitchford R A Esq.

6,400,000

0.64

Central African Mining & Exploration Co Plc

6,222,222

0.62

Enso Capital Management

6,066,662

0.60

Patria Direct 

5,110,000

0.51

Barclays Stockbrokers Limited

4,534,809

0.45

  

Board and management

During the year under review CAG has strengthened its board and management team as part of its strategy of assembling a board with the relevant experience and contacts to advance the existing gold production and exploration assets.  In May 2008, Roy Lander joined the board as an independent non executive chairman, David Glennie and Tom Gibian as non-executive directors and Navaid Burney, as an alternate non-executive director to Tom Gibian.  Together they have solid understandings of the financial markets and possess strong relationships within the African resource sector, which will help CAG as it looks to acquire further assets and strengthen its portfolio of gold assets across Africa.  Charles Prentice resigned as chief financial officer in July 2008 and was replaced by Craig Campbell in September 2008.  In November 2008, Greg Hunter resigned as chief executive and was replaced by Roy Pitchford, who was a long serving non executive director.  David Glennie and Tom Gibian also resigned their directorships, with Navaid Burney assuming the role of a non-executive director in Tom Gibian's stead. Following Navaid Burney's resignation in November 2009, Bryce Fort was welcomed to the Board.

Creditor payment policy

The group policy is to ensure that, in the absence of a dispute, all suppliers are dealt with in accordance with its standard payment practice whereby as far as reasonably possible all outstanding trade accounts are settled within the term agreed with the supplier at the time of the supply or otherwise 30 days from receipt of the relevant invoice. 

Disclosure of information to auditors

The directors who hold office at the date of approval of this directors' report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware and that each director has taken all the steps that he ought to take as a director to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Auditors

KPMG have confirmed their willingness to continue in office, and a resolution for their reappointment will be proposed at the forthcoming Annual General Meeting.

Risks and uncertainties

Cash flow management

Cash resources at the date of reporting are limited and will remain so until the consideration for the sale of the Malian assets are received The Company has satisfied the $5 million liability owing to Investec Bank.  

Project development risk

There can be no assurance that the group's projects will be fully developed in accordance with current plans or completed on time or to budget. Future work on the development of these projects, the levels of production and financial returns arising therefrom may be adversely affected by factors outside the control of the group.

  

Ore body yield

In arriving at the predicted mill feed ore grade and metallurgical recovery, a statistical approach has been adopted according to industry norms (JORC compliant).  However there is a risk that the actual delivered grades and plant recoveries may vary from month to month depending on which part of the ore reserve is currently being mined.  This is particularly true when mining in remnant areas.

Equipment availability

Despite the careful selection of suppliers with representation in the countries in which CAG operates there is always a risk that certain parts and spares required will be unavailable and will be subject to import and clearing delays.

Power

Gold mines, and in particular the plant, are large consumers of power and unscheduled load shedding may result in a decrease in gold output. 

Gold prices

The activities of the group, and particularly the viability of its gold mines, will be subject to fluctuations in demand and prices for all minerals generally and in particular gold prices.  A significant reduction in global demand for gold, leading to a fall in gold prices could lead to a significant fall in the cash flow of the gold mines and/or a delay in exploration and production or even abandonment of these gold mines should it prove uneconomical to develop.  This would have an adverse material impact on the operating results and financial condition of the group.

Insurance risks

The group has insurance cover to mitigate any substantial losses that could arise from major catastrophes. The occurrence of an event that is partially covered by insurance would not have an adverse effect on the business, financial condition and results of operations of the group.

Exploration and development risks

Most exploration projects do not result in the discovery of commercially mineable deposits. While discovery of a base metal or precious metal bearing structure may result in substantial rewards, few properties that are explored are ultimately developed into producing mines.  It is not possible to ensure that exploration programmes carried out by the group will result in profitable commercial mining operations.

Resource and reserve estimation

The group has estimated its resources and reserves on data and information provided by the operating entities and has relied on the accuracy of the information provided. It has also taken a view of the future of commodity prices in determining the economic recoverability of the resources and reserves. Should, however, this information and the associated economic assumption prove to be incorrect, it may impact the estimation made in these financial statements.

Political risk

African countries experience varying degrees of political instability.  There can be no assurance that political stability will continue in those countries where the group currently has, or may have, operations.  In the event of political instability or changes in government policies in those countries where the group operates, the operations and financial condition of the group could be adversely affected. In some jurisdictions the local government is entitled to a free carried interest on conversion of prospecting permits to mining licenses. See note 24 for further details.

  Economic risk

In general, the economies in which we operate have also experienced devaluations, high inflation and high interest rates.  All these economic risks may from time to time adversely affect the group's operations.

Zimbabwe

The situation in Zimbabwe has been well covered in the media. Hyperinflation, currency risk and the indigenisation programme all contribute toward a significant risk being attached to CAG's investment in that country.

Financial instruments

The values of financial instruments reflected in these financial statements have been based on the fact that estimates reflect the fair value.  This is primarily in the valuation of assets and liabilities acquired during the period and also the valuation of the gold sale agreement.  However, should this assumption prove to be incorrect, the fair values reflected in these financial statements may change.

Exchange controls

Some of the countries in which the group operates have maintained strict controls on access to foreign currency and the repatriation of funds.

Currency and exchange rate fluctuations

All the group's revenues from its African operations are either denominated in, or priced by reference to, US Dollars.  The group conducts its operations in a number of jurisdictions and therefore, notwithstanding the use of US Dollars in relation to its African operations, is subject to fluctuations in exchange rates between these countries in relation to the relative costs of inputs, labour and returns received from production. A significant fluctuation in any of the group's key operating currencies could have a material adverse effect on the business, financial condition and results of operations of the group.

Director's indemnities

All directors and officers benefit from qualifying third party indemnity provisions in place during the financial year and at the date of this report.

Contributions

Political contributions and charitable donations

The group made no charitable donations or political contributions for the 2008 year (2007: £nil). 

Post‐balance sheet events

Extraordinary General Meeting 

CAG held an extraordinary general meeting ("EGM") on 20 April 2009.  The purpose of the meeting was to consider and if thought fit, to approve the following ordinary and special resolutions in connection with the proposed placing of new ordinary shares and the proposed partial conversion of convertible loan agreements:

  Ordinary Resolutions

(i)

increase the authorised share capital of the company from £5,000,000 to £5,500,000 by the creation of 100,000,000 ordinary shares of 0.5 pence each;

(ii)

give the directors the authority to allot the _uthorized but unissued share capital of the company;

Special Resolutions

(iii)

specifically disapply pre-emption rights up to a nominal value of £2,829,855 of share capital pursuant to Section 95 of the Act in respect of the Placing;

(iv)

specifically disapply pre-emption rights up to a nominal value of £1,336,321 of share capital pursuant to Section 95 of the Act in respect of the Conversion; and

(v)

generally disapply pre-emption rights up to a nominal value of £479,569 of share capital, being all of the company's authorised but unissued share capital following the Placing and the Conversion, pursuant to Section 95 of the Act in addition to the disapplications referred to at (iii) and (iv) above.

The company has conditionally placed 565,970,992 new ordinary shares with ECP Africa and HBD at 1.00 penny per share to raise net proceeds of approximately £5.7 million, before total costs of approximately £0.5 million.

The primary reason for the placing was to raise sufficient funds to meet the Investec Bank Debt and, along with the proceeds from the sale of the Malian assets, to provide sufficient working capital for the Company to continue to enhance the value of its assets in Zimbabwe and Botswana.

Convertible Loan Agreements

In June and July 2008, the Company entered into the convertible loan agreements, under the terms of which the company borrowed $3.94 million (approximately £2.28 million using the rate of exchange prevailing on the date of the agreement) from ECP Africa ("ECP") and $3 million (approximately £1.7 million, using the rate of exchange prevailing on the date of the agreement) from Investec Asset Management ("IAM"). The funds received by the company under the convertible loan agreements carried interest at 10 per cent. per annum, compounded monthly in arrears and payable on maturity.

The terms of the convertible loan agreements provide that the monies received by the Company under the convertible loan agreements can be converted, at the election of the lender, in the event that the Company allotted any new shares prior to the date for repayment of the loan. The convertible loan agreements further provided that they would be automatically converted in the event that the company raised at least $10 million (approximately £5.7 million, using the rate of exchange prevailing at the date that the convertible loan agreements were announced to the market) in an equity fundraising prior to the date for repayment of the loan, in which case the convertible loan agreements and accrued interest would convert automatically at a price which is 10 per cent. below the issue price of such fundraising. The repayment date for the loans under the terms of the convertible loan agreements was in January 2009 but the loans have not been repaid and therefore the $6.94 million (being $3.94 million due to ECP and $3.0 million due to IAM respectively) and accrued interest thereon (being approximately $0.5 million) is due and payable by the Company.  While the proceeds under the placing will, in the directors' opinion, be both sufficient to repay the $5 million owed to Investec Bank and in the directors' opinion, for the company's working capital needs, it will not be sufficient to repay the monies due under the convertible loan agreements. Accordingly, the Company entered into the new loan agreements with IAM and ECP as detailed below.

Under the terms of the new IAM loan agreement, the Company has agreed with Investec Asset Management, subject to Shareholder approval for the disapplication of pre-emption rights and the granting of the authority to directors to allot shares, to amend and supercede the terms of the IAM Convertible Loan Agreement so that $1 million (being approximately £0.7 million) of the monies lent pursuant to the IAM Convertible Loan Agreement shall convert into new Ordinary Shares at 0.9p per share immediately following the Placing, with the outstanding amount of $2.2 million (plus interest accruing at a rate of 10 per cent. per annum) being repayable in cash on the earlier of the sale of the Mali assets or 14 April 2010.

Under the terms of the New ECP Loan Agreement, the Company has agreed with ECP Africa, subject to Shareholder approval for the disapplication of pre-emption rights and the granting of the authority to directors to allot shares, to amend and supercede the terms of the ECP Convertible Loan Agreement so that $2.4 million (being approximately £1.7 million) of the monies lent pursuant to the ECP Convertible Loan Agreement shall convert into new Ordinary Shares at 0.9p per share immediately following the Placing with the outstanding amount of $1.8 million (plus interest accruing at a rate of 10 per cent. per annum) being repayable in cash on the earlier of the sale of the Mali assets or 14 April 2010. 

Following the Conversion the Company owed $1.8 million (plus accrued interest) to ECP Africa and $2.2 million (plus accrued interest) to Investec Asset Management.

Subject to Shareholder approval for the disapplication of pre-emption rights and the granting of the authority to directors to allot shares, the Conversion will give rise to the issue of a further 267,264,081 new Ordinary Shares representing 26.62 per cent. of the Resulting Share Capital. Following the Conversion, ECP Africa will have a beneficial interest in 50.02 per cent. of the Resulting Share Capital and Investec Asset Management will have a beneficial interest in 10.48 per cent. of the Resulting Share Capital.

The resolutions were duly passed and admission of the placing shares and the conversion shares to trading on AIM resulted in the lifting of the suspension on the company's shares on 22 April 2009.

Investec Asset Management (Pty) Limited ('IAM') and ECP have agreed to extend the terms of the loans made available to the Company as described in a circular sent to shareholders on 27 March 2009, amounting to US$2.2 million and US$1.8 million respectively. These loans now have a new maturity date of 29 April 2011 (previously the earlier date of 14 April 2010 or within five days of the receipt of funds by the Company from the sale of its entire shareholding in Mali Goldfields SA and Songhoï Resources SA).

Additionally, CAG has entered into new Convertible Loan Agreements ('the Convertible Loan Agreements') with HBD Zim Investments Limited ('HBD'), ECP and IAM, (together, 'the Lenders'). The Convertible Loan Agreements total circa US$1.25 million (approximately £816,000) and amount to US$397,267 from HBD (approximately £238,924), US$705,070 from EPC (approximately £424,048) and US$147,662 from IAM (approximately £88,808). All loan amounts used the rate of exchange prevailing on the date of the agreement. The funds received by the Company under the Convertible Loan Agreements carry interest at 10 per cent. per annum, compounded monthly in arrears with the full amount payable on the maturity date, 29 April 2011. There is no penalty for early repayment of the loans. 

The terms of the Convertible Loan Agreements provide that the Lenders have the right to convert all but not part only of the loans at the conversion price of the lesser of 0.9 pence per ordinary share and ten (10) percent below the USD equivalent of any price at which the Borrower issues Shares while any amount of the Loan remains repayable to the Lender. Under the terms of the Convertible Loan Agreements each of the Lenders acknowledge that the Company does not have the capacity to issue the full number of shares issuable should they wish to convert the loans and that, should the Company not receive the required shareholders approval needed to create and issue all of the shares issuable on conversion, the Lenders shall only be able to exercise their conversion rights to the extent that such shares exist and the directors have the relevant authorities.

Malian Assets Disposal

The Company has entered into a binding agreement to dispose of its 80 per cent. equity interests in each of Mali Goldfields SARL and Songhoï Resources SA (together 'the Malian Assets') ('the Disposal') to Colonial Resources Limited ('Colonial') ('the Agreement') for a total consideration of US$5.0 million ('the Consideration'). As at 31 December 2008, the Malian Assets, which are early stage gold exploration assets, consisting of 18 prospective permits spanning circa 2,137km² of the Birimian strata, were recorded as having a book value of £3.8 million.

The Consideration is made up of an initial non-refundable payment of US$0.5 million in cash, which was paid on signing of the Agreement, and a further US$3.5 million payable in cash to the Company on completion of the Disposal ('Completion'). A further US$1.0 million will be payable to the Company in cash upon the achievement of a JORC compliant indicated and measured gold resource of at least 500,000 ounces.

Completion must occur on or before 3 March 2010 and is subject to, inter alia, shareholder approval. A Circular containing notice of the General Meeting will be sent to shareholders for approval shortly. The time between signing the Agreement and Completion will also be used by Colonial to raise sufficient funds to satisfy the Consideration and to seek shareholder approval for the necessary issue of equity.

CAG will use the proceeds of the disposal to satisfy its working capital requirements, to meet certain creditor balances that will fall due on Completion and to develop its Zimbabwean gold assets.

By order of the board

Philip Enoch

Company Secretary

23 December 2009

Statement of Directors Responsibilities

The directors are responsible for preparing the directors' report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they have elected to prepare both the group and the parent company financial statements in accordance with IFRS as adopted by the EU and applicable laws.

The group and parent company financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position of the group and the parent company performance for the year. The Companies Act 1985 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.

In preparing both the group and parent company financial statements, the directors are required to:

Select suitable accounting policies and then apply them consistently;

Make judgments and estimates that are reasonable and prudent;

State whether they have been prepared in accordance with IFRSs as adopted by the EU; and

Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 1985. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.

Independent Auditors report 

We have audited the group and parent company financial statements (the ''financial statements'') of Central African Gold plc ("the Company") for the year ended 31 December 2008 which comprise the Group Income Statement, the Group and Parent Company Balance Sheets, the Group Cash Flow Statement, the Group and Parent Company Statements of Changes in Equity and Statements of Recognised Income and Expense and the related notes. These financial statements have been prepared under the accounting policies set out therein. 

This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU are set out in the Statement of Directors' Responsibilities on page 31

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). 

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements. 

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. 

We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements.  We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements

Basis of Audit Opinion 

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board, except that the scope of our work was limited as explained below.

An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed.

We planned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error.

However, in relation to the assets, liabilities, income and expenses of the group solely in relation to one subsidiary, Central African Gold Ghana [Limited] ("CAG Ghana"), the information available to us was limited. As explained in the basis of preparation (see note 1), Investec Bank exercised its charge and took control of CAG Ghana on 14 January 2009 and the accounting records in respect of the year ended 31 December 2008 of CAG Ghana have not been made not available to us. Accordingly, we were unable to obtain sufficient appropriate audit evidence in respect of: the assets and liabilities (as separately analysed on page 35) amounting to total assets of £36.5 million and total liabilities of £36.8 million; and of each item of income and expense (as separately analysed on page 33) resulting in a net loss for the year of £26.1m. The assets, liabilities and items of income and expense are included in the consolidated financial statements in respect of that subsidiary.

While our work was not limited in respect of the other assets, liabilities, income and expenses of the group and we were able to obtain sufficient appropriate audit evidence over those amounts, because of the significance of the CAG Ghana balances to the group as a whole, we have been unable to form a view on the consolidated financial statements.

In determining the form of our opinion we also evaluate the overall adequacy of the presentation of information in the financial statements.

Opinion: disclaimer of opinion on the consolidated financial statements of the group

Because of the possible effect of the limitations in evidence available to us, we are unable to form an opinion as to whether the consolidated financial statements:

give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU of the consolidated financial position of the Group as at 31 December 2008 and of its consolidated financial performance and its consolidated cash flows for the year then ended; 

have been properly prepared in accordance with the Companies Act 1985

As a consequence of the limitation on our work in relation to CAG Ghana referred to above, we have not obtained all the information and explanations that we considered necessary for the purpose of our audit of the consolidated financial statements of the group; 

  Opinion on the financial statements of the company 

In our opinion:

the parent company financial statements give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU as applied in accordance with the provisions of the Companies Act of the state of the parent company's affairs as at 31 December 2008; the information contained in the Directors' Report is consistent with the financial statements.

Emphasis of matter - Going Concern

In determining the form of our opinion on the financial statements, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the Group's and the Company's ability to continue as a going concern. In particular, the ability to continue as a going concern is dependent upon the Group effecting suitable financial and other arrangements to enable the development of the Zimbabwean assets and also to the successful completion of the sale of the Mali assets. These conditions, along with other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty which cast significant doubt on the Group's and the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

KPMG Audit Plc

Chartered Accountants

Registered Auditor

23 December 2009

Consolidated income statement

for the year ended 31 December 2008

2008

2007

in thousands of pounds sterling

Note

Group ex Ghana

Ghana

Total

Total

Revenue

611

13,490

14,101

10,965

Cost of sales

(1,246)

(23,066)

(24,312)

(11,945)

Gross loss

(635)

(9,576)

(10,211)

(980)

Other operating income

-

4

4

41

Administrative charges

(3,439)

(2,232)

(5,671)

(9,647)

Other administrative expenses

(2,683)

(2,232)

(4,915)

(7,455)

Share based payments

7,9

(756)

-

(756)

(2,192)

Operating loss before impairment

(4,074)

(11,804)

(15,878)

(10,586)

Impairment

(170)

(14,450)

(14,620)

-

Operating loss 

(4,244)

(26,254)

(30,498)

(10,586)

Financial income

3

5,457

328

5,785

306

Financial expenses

4

(1,655)

(615)

(2,270)

(4,495)

Other financial expenses

(1,655)

(617)

(2,272)

(662)

Gold sale agreement valuation

-

2

2

(3,833)

Loss before tax

(442)

(26,541)

(26,983)

(14,775)

Taxation

5

(22)

471

449

38

Loss for the year

(464)

(26,070)

(26,534)

(14,737)

Attributable to:

Equity holders of the parent

(26,684)

(14,732)

Minority interest

150

(5)

Loss for the year

(26,534)

(14,737)

Basic and diluted loss per share

17

(15.91p)

(15.31p)

Statements of recognised income and expense

for the year ended 31 December 2008

Group

Company

2008

2007

2008

2007

in thousands of pounds sterling

Total

Total

Total

Total

Foreign exchange translation differences

(10)

(284)

-

-

Income and expenses recognised directly in equity

(10)

(284)

-

-

Loss for the year

(26,534)

(14,737)

(35,541)

(6,924)

Total recognised income and expense for the year

(26,544)

(15,021)

(35,541)

(6,924)

Attributable to:

Equity holders of the parent

(26,694)

(15,016)

(35,541)

(6,924)

Minority interest

150

(5)

-

-

Total recognised income and expense for the year

(26,544)

(15,021)

(35,541)

(6,924)

Consolidated balance sheet

as at 31 December 2008

2008

2007

in thousands of pounds sterling

Note

Group ex Ghana

Ghana

Total

Total

Assets

Goodwill

10

691

-

691

501

Property, plant and equipment

11

5,721

31,703

37,424

31,582

Exploration and other evaluation assets

12

4,405

-

4,405

1,957

Total non-current assets

10,817

31,703

42,520

34,040

Inventories

13

3

1,000

1,003

2,957

Trade and other receivables

14

424

1,028

1,452

580

Cash and cash equivalents

15

267

3,638

3,905

2,821

Total current assets

694

5,666

6,360

6,358

Total assets

11,511

37,369

48,880

40,398

Equity

Share capital

16

854

-

854

530

Share premium

16

43,625

-

43,625

28,352

Foreign currency translation reserve

16

3,763

(3,994)

(231)

(221)

Accumulated (loss) / profit

16

(44,430)

3,746

(40,684)

(14,756)

Total equity attributable to equity holders of the parent

3,812

(248)

3,564

13,905

Minority interest

150

-

150

-

Total equity

3,962

(248)

3,714

13,905

Liabilities

Loans and other borrowings

18

-

-

-

9,701

Other financial liabilities

19

-

1,694

1,694

2,654

Deferred taxation

20

563

-

563

855

Provisions

21

338

4,922

5,260

3,253

Total non-current liabilities

901

6,616

7,517

16,463

Loans and borrowings - current portion

18

4,995

14,714

19,709

3,143

Other financial liabilities - current portion

19

-

2,137

2,137

1,179

Trade and other payables

22

1,652

13,077

14,729

5,694

Bank overdraft

15

-

1,061

1,061

-

Taxation

1

12

13

14

Total current liabilities

6,648

31,001

37,649

10,030

Total liabilities

7,549

37,617

45,166

26,493

Total equity and liabilities

11,511

37,369

48,880

40,398

Company balance sheet

as at 31 December 2008

2008

2007

in thousands of pounds sterling

Note

Total

Total

Assets

Investment in subsidiaries

26

3,434

10,339

Total non-current assets

3,434

10,339

Trade and other receivables

14

35

36

Amount due from subsidiaries

25

5,775

15,575

Cash and cash equivalents

15

161

22

Total current assets

5,971

15,633

Total assets

9,405

25,972

Equity

Share capital

16

854

530

Share premium

16

43,625

28,352

Accumulated loss

16

(40,560)

(5,775)

Total equity attributable to equity holders of the parent

3,919

23,107

Total equity

3,919

23,107

Liabilities

Provisions

21

78

38

Total non-current liabilities

78

38

Loans and other borrowings

18

4,995

-

Amount due to subsidiaries

25

-

1,763

Trade and other payables

22

413

1,064

Total current liabilities

5,408

2,827

Total liabilities

5,486

2,865

Total equity and liabilities

9,405

25,972

Statement of cash flows

for the year ended 31 December 2008

Group

Company

2008

2007

2008

2007

in thousands of pounds sterling

Note

Total

Total

Total

Total

Cash flows from operating activities

Loss before tax

(26,983)

(14,775)

(35,541)

(6,924)

Adjusted for:

Financial income

(5,785)

(306)

(97)

(10)

Financial expense (including gold sale

2,270

4,495

174

1

agreement)

Share-based payments

756

2,192

756

2,192

Depreciation

2,084

1,263

-

-

Loss on disposal of property, plant and

-

17

-

-

Equipment

Impairment loss on exploration assets

300

-

-

Impairment of Ghana assets

14,620

-

-

-

Impairment of exploration assets and property, plant and equipment 

-

36,207

Decrease/(increase) in inventories

(529)

39

-

-

Decrease/(increase) in trade and other 

(1,991)

1,781

1

299

Receivables

(Decrease)/increase in trade and other 

3,971

4,326

(611)

2,750

payables and provisions

Net cash from operating activities

(11,587)

(668)

889

(1,692)

Cash flows from investing activities

Interest received

112

29

97

10

Interest expense

(192)

(245)

(174)

(1)

Acquisition of business net of cash

-

(2,330)

-

-

Acquisition of exploration assets

(1,360)

(1,657)

-

-

Acquisition of property, plant and equipment

(4,901)

(10,806)

-

-

Investment in subsidiaries

(21,265)

(3,536)

Net cash from investing activities

(6,341)

(15,009)

(21,342)

(3,527)

Cash flows from financing activities

Proceeds from the issue of share capital

15,597

932

15,597

2,034

Loan and borrowing received

3,593

12,517

4,995

-

Repayment of loans

(1,946)

-

-

-

Net cash from financing activities

17,244

13,449

20,592

2,034

Net increase in cash and cash equivalents

(684)

(2,228)

139

(3,185)

Cash and cash equivalents at 1 January

2,821

5,076

22

3,207

Cash acquired (restricted)

-

-

-

-

Effect of exchange rate fluctuations on cash held

707

(27)

-

-

Cash and cash equivalents at 31 December

15

2,844

2,821

161

22

Restricted cash included in cash and cash equivalents at 31 December

2,978

2,332

-

-

Notes to the financial statements

1. Significant accounting policies

(a) Going concern basis

The financial statements have been prepared on the going concern basis, notwithstanding the loss in the year to 31 December 2008 of £26.4 million and the group's net current liabilities of £20.1 million (2007: £3.7 million), which the directors believe to be appropriate for the following reasons.  The directors have taken the following actions to secure funding for the operations of the Group while they seek new financial and other arrangements to take forward the development of the Zimbabwean assets: 

 In January 2009 the group raised £5.4 million (net of fees) which was used in part to repay the outstanding liability to Investec Bank.

The repayment of the £2.5m of convertible loan notes has been deferred by the company's major shareholders until April 2011.

Additional convertible loan notes, also repayable in Aril 2011, have been raised in the sum of £0.8 million.

CAG is in the process of finalising the disposal of its Mali assets. This is subject inter alia to approval by shareholders. In addition, the purchaser is in the process of raising finance to cover the main instalment of the sale price in March 2010 and a final instalment in May 2011 which is also contingent on reserves determination.

The company now has no significant debt repayment obligations before April 2011The company has uncommitted facilities for a further $1.25m (£0.8m)which will be drawn on in the form of convertible and other loan notes and that would be repayable in April 2011.

Operating costs have been minimized to the extent possible.

Based on this and on the director's detailed review of current operations for the foreseeable future, the Directors are of the view that cash resources at the date of reporting and funding arrangements agreed are sufficient to maintain the corporate overhead structure as well as to make limited investment in Zimbabwe for the foreseeable future

The company's future viability is dependent upon the enhancement of value of the Zimbabwean assets. It is the director's view that the group has sufficient funds to keep the Zimbabwean mines operating at current low levels while they seek financial and other arrangements to take forward the development of the Zimbabwean assets onto a commercial and profitable production scale basis. The new arrangements may be through a joint arrangement, through new equity invested in the company or through exchanging some or all of the Zimbabwean assets for an equity stake in any acquiring company. The convertible loan notes due in April 2011 would also need to be repaid or converted as part of the new arrangements. Although discussions with interested parties have begun, there can be no certainty that a suitable arrangement will be effected.

There are also uncertainties surrounding the completion of the sale of the Mali assets as, as explained above, this is subject to approval by shareholders, availability of purchaser finance and the contingent instalment.

Should the disposal of the Mali assets not proceed as planned, the directors will have to seek an alternative purchaser. Based on the level of interest displayed in the company's Mali assets, the directors have no reason to believe that this will not be possible.

These factors indicate the existence of a material uncertainly which may cast significant doubt on the Group and Company's ability to continue as a going concern. The Group and Company may therefore be unable to continue realising its assets and discharging its liabilities in the normal course of business. The financial statements do not include any adjustments that might result were the basis of preparation inappropriate.

(b) Basis of preparation

Central African Gold Plc ("the Company") is a company domiciled and incorporated in the United Kingdom. The consolidated financial statements of the Company for the year ended 31 December 2008 comprise the company and its subsidiaries (together referred to as the "group").

Both the parent company financial statements and the group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). On publishing the parent company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in Section 230 of the Companies Act 1985 not to present its individual income statement and related notes that form a part of these approved financial statements.

The financial statements are presented in pounds sterling, rounded to the nearest thousand, which is the functional currency of the company and the presentation currency for the group. The functional currency for the subsidiaries is primarily the US dollar.

The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.  The accounting policies have been applied consistently by group entities.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

  

(c) Statement of compliance

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

Judgements made by the directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

Measurement convention

The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value.  Non-current assets and disposal groups held for sale are stated at the lower of previous carrying amount and fair value less costs to sell.  Other financial liabilities are initially recognised at fair value at the date the contract is entered into, with the corresponding fair value adjustment being recognised through the income statement. Subsequent remeasurement to fair value is performed at each balance sheet date with the any further adjustments being recognised through the income statement.

(d) Significant accounting and estimates

i. Impairment of Central African Gold Ghana Limited

As part of the annual impairment review of asset carrying values a charge of £14.5 million was recorded in relation to Central African Gold Ghana Limited's Bibiani mine. The group carried out an impairment review of the related cash generating unit. The review determined that the commercial viability of the mine has decreased significantly. As a result an impairment charge was charged to the income statement.

ii. Reserves and resources

Reserves and resources are determined by Competent Persons. The principal reserves and resources held by the Group at the time of signing the Annual Report are contained on page 8 of the Annual Report and were last assessed during 2008. The determination of reserves and resources requires a wide variety of assessments regarding the geology of the ore body, mining plans and economic viability which are all subject to inherent uncertainties.

iii. Rehabilitation provisions

The nature of the mining operations of the Group gives rise to environmental obligations which are reflected in the rehabilitation provision. The level of provision needs to reflect the present value of the future remediation costs. Estimating the future remediation costs involves significant judgements including for example the local geography and geology, whether contamination has occurred and, if so the nature of the contaminants involved and the remediation approach to be taken and the likely costs to be incurred. In addition, the outflows in respect of rehabilitation are generally far into the future. Judgment is therefore also involved in estimating the timing of the cash flow and in the discounting factors to determine the present value. In particular, because of the recent economic history of

(e) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Company.  Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.  In assessing control, potential voting rights that presently are exercisable or convertible are taken into account.  The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

CAG Ghana

Following the resignation of the chief executive on November 12, the Company's senior management withdrew from the Ghanaian operations placing control of the operations in the hands of the local management.  The Company initiated discussions with its major shareholders as well as with Investec Bank Limited, who provided the project finance facility.  Pending the recapitalisation of the company and consequently the group, the flow of economic benefits from CAG Ghana was effectively controlled by Investec Bank through the Debt Service Reserve Account. Despite legal ownership of CAG Ghana vesting in the company at year end, the Company has determined that with effect from 30 November 2008, CAG Ghana ceased to meet the definition of a subsidiary.

In formulating the group's consolidated position, the management accounts as at 30 November 2008, adjusted for certain items, were used as the basis for consolidating the CAG Ghana results of operations and financial position.

On 14 January 2009, the company received a notification from Investec Bank stating that it had invoked the power of attorney created over the 90,000 shares in CAG Ghana held by the Company and that Investec Bank was the legal owner of CAG Ghana.

(ii) Transactions eliminated on consolidation

Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

(iii) Acquisitions

The results of business acquired in the year are consolidated from the effective date of acquisition. The net assets and contingent liabilities acquired are incorporated in the consolidated financial statements at their fair values at the date of acquisition. Any excess of fair value of net assets above consideration is recognised in the income statement.

(f) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to pounds sterling at the foreign exchange rate ruling at that date.  Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to pounds sterling at foreign exchange rates ruling at the dates the fair value was determined.

(ii) Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to pounds sterling, the group's reporting currency, at foreign exchange rates ruling at the balance sheet date.  The revenues and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to pounds sterling at rates approximating to the foreign exchange rates ruling at the dates of the transactions.  Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity.

(iii) Functional currency of Zimbabwean subsidiaries

The Company's policy is to assess and determine the functional currency of subsidiaries.  The Zimbabwe subsidiaries have been determined to have a US dollar functional currency.  Transactions denominated in Zimbabwean dollars and other currencies are translated into US dollars at the rate prevailing at the date of the transaction or the average exchange rate as appropriate. Monetary assets and liabilities are retranslated into US dollars at the rate prevailing at the balance sheet date. The resulting exchange differences are recorded in the income statement.

In 2008 the rate of inflation in Zimbabwe reached extraordinary levels to the extent that inflation indices were outdated as soon as they became available.  When inflation indices were available, there was a high level of subjectivity with respect to measurement, resulting in inflation measures that varied considerably depending on the methods applied and the inputs into the inflation measurement model. 

(iv) Net investment in foreign operations

Exchange differences arising from the translation of the net investment in foreign operations, and of related hedges are taken to a translation reserve. They are released into the income statement upon disposal.

(g) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale provided that future economic benefit is considered probable.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(h) Goodwill

Goodwill arises on the acquisition of subsidiaries and associates.

Goodwill represents the excess of the cost of the acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in profit or loss.

Goodwill is measured at cost less accumulated impairment losses. 

Goodwill is assessed by management for impairment on a yearly basis.

The Company has one cash generating unit to which goodwill has been attached: Zimbabwe.

  

(i) Property, plant and equipment

(i) Development costs

Development costs relating to major programmes at a mine are capitalised. Development costs consist primarily of expenditure to expand the capacity of the mine.  Day-to-day mine development costs to maintain production are expensed as incurred. Initial development and pre-production costs relating to a new ore body, including amortisation, depreciation and interest on borrowed funds used to develop the ore body, are capitalised until commissioning of production facilities.

The group reviews the carrying amount of mining assets and development costs when circumstances suggest the carrying amount may not be recoverable.  Recoverability is assessed using estimates of future cash flows on a discounted basis, including revenues, operating costs and future capital expenditures. Where necessary a reduction in carrying amount is recorded.

(ii) Property, plant and equipment

Property, plant and equipment are included at cost.  Cost includes costs directly attributable to bringing an asset to working condition for its intended use.  Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. The group reviews the carrying amount of property, plant and equipment when circumstances suggest that the carrying amount may not be recoverable. Recoverability is assessed using estimates of future cash flows on a discounted basis, including revenues, operating costs and restoration costs.  Where necessary a reduction is recorded.

(iii) Depreciation

Depreciation of property, plant and equipment is calculated on a straight line basis using rates which are designed to write off the assets over their estimated useful lives as follows:

land and buildings

10 years

plant and equipment

3 - 8 years

fixtures and fittings

3 years

mine development and mineral reserves

life-of-mine

The residual value, if not insignificant, is reassessed annually.

  

(j) Investments

Investments in subsidiaries are stated in the parent company's accounts at cost less any provision for impairment.

(k) Exploration and evaluation assets

Expenditure related to acquisition, exploration and development of exploration properties, net of any recoveries, and including an appropriate allocation of administration costs are capitalised. If an exploration property is abandoned, continued exploration is not planned in the foreseeable future or when other events and circumstances indicate that the carrying amount may not be recovered, the accumulated costs and expenditures are written-off. Capitalised expenditure relating to exploration projects represents costs to be charged to operations in the future and do not necessarily reflect the present or future values of the particular projects.

(l) Trade and other receivables

Trade and other receivables are stated initially at fair value at acquisition or at their cost less impairment losses (see accounting policy m).

(m) Inventories

Stores and materials are valued at the lower of cost and net realisable value on a weighted average cost basis.  Obsolete, redundant and slow moving stock is identified and written down to recoverable amounts / net realisable values.

Gold inventories are valued at the lower of average cost of production or net realisable value.  Stock-pile and in-process inventories are valued at the lower of moving average cost of production and estimated net realisable value.  The average cost of production is taken as total cost incurred on mining, including amortisation costs, and is allocated to inventory on a unit of production basis.

(n) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

  

(o) Impairment

The carrying amounts of the group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

For goodwill, the recoverable amount is estimated at each balance sheet date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of cash-generating units (group of units) are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

(i) Calculation of recoverable amount

The recoverable amount of the group's receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their value in use or fair value less costs to sell In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.  For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing fair value less costs to sell, the directors have sought valuations from independent specialists, except in their assessment of Ghana where they made a commercial assessment.

(ii) Reversals of impairment

An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

An impairment loss in respect of goodwill is not reversed.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.  In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

(p) Share-based payment transactions

The share option programme allows Company and Group employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity.  The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options.  The fair value of the options granted is measured using a Black Scholes model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.  During the year the Company has applied IFRIC 8: Scope of IFRS2.  This has resulted in the parent company recognising the benefit that it receives from subsidiary employees receiving share options.  This resulted in the restatement of the 2006 Company balance sheet.

(q) Provisions

A provision is a liability of uncertain amount and/or timing. A provision is recognised in the balance sheet when the group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.  If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(i) Environmental rehabilitation recognition

Long-term environmental obligations are based on the group's environmental management plans, in compliance with current environmental and regulatory requirements in the jurisdiction in which the group operates.  Full provision is made based on the estimated cost of restoring the environmental disturbance that has occurred up to the balance sheet date with a corresponding increase in the related property, plant and equipment.  Increases due to additional environmental disturbances are capitalised and amortised over the life of the mine.

Annual increases in the provision relating to the change in the provision and inflationary increases are shown separately in the income statement, except where the related mine is under development and has not yet reached commercial levels of production, in which case such adjustment is charged or credited to the balance sheet carrying value of mining assets.

The estimated costs of rehabilitation is reviewed annually and adjusted as appropriate for changes in legislation or technology.

Annual contributions are made to fund the estimated cost of rehabilitation during and at the end of the life of the mine. The funds contributed are included under cash and cash equivalents and shown as restricted cash.

(r) Trade and other payables

Trade and other payables are stated at cost.

(s) Revenue

Revenue from the sale of precious metal is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer.

(t) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

  

(i) Deferred tax

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.  The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.  The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(u) Financial instruments

Financial assets and liabilities are recognised on the group's balance sheet when the group becomes a party to the contractual provisions of the instrument.

(i) Loans and borrowings

Financial liabilities are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method.

(ii) Measurement

Financial assets are initially measured at fair value plus, in the case of financial assets and liabilities not at fair value through the income statement, transaction costs that are directly attributable to acquisition or issue of the financial asset or liability.  Subsequent to initial recognition, these instruments are measured as set out in the relevant accounting policy previously described.

(iii) Offset

Where a legally enforceable right of offset exists for recognised financial assets and financial liabilities, and there is an intention to settle the liability and realise the asset simultaneously or to settle on a net basis, all related financial effects are offset.

  

Where the group retains substantially all the risks and benefits of ownership of the financial asset, the group continues to recognise the financial asset.

(iv) Derivative financial instruments

Derivative financial instruments are measure at fair value through the income statement.

(v) Comparative results

Comparative results have been regrouped and restated where necessary.

(w) Segment reporting

A segment is a distinguishable component of the group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

(x) New  standards, amendments and interpretations

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2008, and have not been applied in preparing these consolidated financial statements. The new standards that management believes will not have a significant effect on the financial statements of the group.

Title

Type

Effective date

IAS 1 - Presentation of Financial Statements

Standard

Financial year commencing on or after 1 January 2009

IAS 23 - Borrowing Costs (revised)

Amendment to existing standard

Financial year commencing on or after 1 January 2009

IFRS 8 - Operating Segments

Standard

Financial year commencing on or after 1 January 2009

IFRIC 11 - IFRS 2 Group and Treasury Share Transactions

IFRIC interpretation

Financial year commencing on or after 1 March 2007

  2. Segment reporting

Segment information is presented in respect of the group's geographical segments. Inter-segment pricing is determined on an arm's length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Geographical segments

The operating and exploration segments are managed on a worldwide basis, through corporate offices in the United Kingdom and South Africa, but operate in four principal geographical areas of Ghana, Mali, Botswana and Zimbabwe.  In presenting information on the basis of geographical segments, segment profit is based on the geographical location of operations and customers.  Segment assets are based on the geographical location of the assets.

Ghana

Mali

Botswana

Zimbabwe

Corporate

Group

In thousands of pounds sterling

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

Revenue

13,490

8,362

-

-

-

-

611

2,603

-

-

14,101

10,965

Loss before tax

(26,541)

(6,427)

749

(31)

--

(33)

(683)

(471)

(508)

(7,813)

(26,983)

(14,775)

Income tax expense

471

48

-

-

-

-

(22)

(10)

-

-

449

38

Loss for the year

(26,070)

(6,379)

749

(31)

-

(33)

(705)

(481)

(508))

(7,813)

(26,534)

(14,737)

Segment assets

37,369

35,641

4,715

2,888

-

-

6,268

346

528

1,523

48,880

40,398

Segment liabilities

(37,617)

(20,123)

(61)

(3,179)

(8)

(160)

(1,464)

(733)

(6,016)

(2,424)

(45,106)

(26,493)

Total net assets

(248)

15,518

4,654

(291)

(8)

(160)

4,804

(387)

(5,488)

(775)

3,714

 13,905

Additions to non-current assets

4,608

10,547

1,377

1,814

-

-

1

117

25

312

6,011

12,790

Depreciation

1,895

1,086

53

34

-

-

-

20

136

123

2,084

 1,263

Impairment

14,450

-

-

-

-

300

-

-

170

-

14,620

300

Revenue is in respect of gold bullion sales

Group

in thousands of pounds sterling

2008

2007

3. Financial income

Interest income

112

29

Foreign exchange gain

5,673

277

Financial income

5,785

306

4. Financial expenses

Interest expense

192

245

Unwinding of interest on rehabilitation provision (note 21)

-

68

Foreign exchange loss

2,080

349

Other financial expenses

2,272

662

Gold sale agreement fair valuation (note 19)

(2)

3,833

Financial expenses 

2,270

4,495

5. Taxation

Recognised in the income statement

Current tax

Current year

22

4

Total current tax

22

4

Deferred tax

Current year

(471)

(42)

Total deferred tax (credit) / charge

(471)

(42)

Total income tax in income statement

(449)

(38)

Reconciliation of effective tax rate

Loss before tax

(26,813)

(14,775)

Income tax credit using the domestic corporation tax rate of 20% (2007: 20%)

(5,362)

(2,995)

Unrecognised deferred tax assets

4,913

2,917

Current year tax (credit) / charge

(449)

(38)

  

Group

in thousands of pounds sterling

2008

2007

6. Expenses and auditors remuneration

Included in the loss before tax are the following:

Depreciation of property, plant and equipment (note 11)

2,084

1,263

Loss on disposal of property, plant and equipment

-

17

Impairment loss on current assets

6,450

-

Impairment loss on exploration assets (note 12)

170

300

Impairment loss on property, plant and equipment (note 11)

8,000

-

Impairment loss on inventory

3,804

-

Impairment loss of trade receivables

2,646

-

Audit fees - Audit of these financial statements

133

119

- Audit of the financial statements of subsidiaries

56

56

pursuant to legislation

Group

Company

2008

2007

2008

2007

7. Staff expenses

The average number of persons employed by the group (including directors) during the year, analysed by category, was as follows:

Number of employees

Senior employees

19

16

9

6

Other employees

1,207

1,708

3

3

The aggregate payroll costs were as follows:

Wages and salaries

6,699

4,922

1,256

1,878

Share-based payments (See note 9)

756

2,192

756

2,192

  

in thousands of pounds sterling

2008

2007

8. Directors' emoluments

GD Hunter - Remuneration and bonus1

324

300

MW Rosslee - Remuneration and bonus

-

144

CMW Prentice - remuneration

75

22

CI Campbell - remuneration2

4

-

RP Lander - fees

32

-

N Burney - fees

-

-

T Gibian - fees

-

-

D Glennie - fees3

64

-

RA Pitchford - fees

42

24

541

490

1 Includes remuneration to November 2008, accrued leave pay and termination payment (£63,000) which amount had not been paid at year end

2 Pro rata from date of appointment as director

3 Includes amounts billed by Blake Cassels Graydon, of which Mr Glennie is a partner

9. Employee benefits

The share option schemes of the Group are substantially vested or conditions have not been met. As a result, the directors do not feel it relevant to provide detailed information on the schemes.

  

Group

Company

in thousands of pounds sterling

2008

2007

2008

2007

10. Goodwill

Balance at beginning of year

501

-

-

-

Arising on the acquisition of subsidiaries (note 27)

-

501

-

-

Effects of movement in foreign exchange

190

-

-

-

Balance at end of year

691

501

-

-

In terms of IAS 36: Impairment of assets, group management will reassess impairment of goodwill on an annual basis or more frequently if there are indications of it being impaired. The goodwill will be considered on the cash generating unit of Zimbabwe as a whole using projected cash flows on a life of the mine basis. Gold price sensitivity will be included in those projections.

Given the current economic situation, in Zimbabwe, the directors have to apply considerable judgement in assessing the recoverable amount of goodwill and other assets in Zimbabwe.  At this stage, the directors do not believe that there has been an impairment of the overall asset value.

The goodwill arose out of the business combination during the acquisition of Falcon Gold Zimbabwe Limited and Olympus Gold Mines Limited in Zimbabwe as a result of the raising of a deferred tax liability against the fair value uplift of the property, plant and equipment balance.

11. Property, plant and equipment

in thousands of pounds sterling

Land and buildings

Mineral reserves

Plant and equipment

Fixtures and fittings

Mine development

Total

Cost

Balance at 1 January 2007

2,045

1,532

7,527

80

7,433

18,617

Additions

292

5

1,713

44

9,079

11,133

Acquisitions through business combinations

37

3,340

152

-

10

3,539

Disposals

-

-

(7)

(13)

-

(20)

Effects of movement in foreign exchange

(40)

(30)

(106)

2

(146)

(320)

Balance at 31 December 2007

2,334

4,847

9,279

113

16,376

32,949

Balance at 1 January 2008

2,334

4,847

9,279

113

16,376

32,949

Additions

76

-

4,360

2

463

4,901

Disposals

-

-

-

-

(18)

(18)

Transfers

-

-

-

-

(40)

(40)

Effects of movement in foreign exchange

885

572

4,586

11

6,210

12,264

Balance at 31 December 2008

3,295

5,419

18,225

126

22,991

50,056

Depreciation

Balance at 1 January 2007

17

-

72

8

-

97

Depreciation charge for the year

209

193

836

20

5

1,263

Accumulated depreciation on disposal

-

-

-

(3)

-

(3)

Effects of movement in foreign exchange

1

-

8

1

-

10

Balance at 31 December 2007

227

193

916

26

5

1,367

Balance at 1 January 2008

227

193

916

26

5

1,367

Depreciation charge for the year

219

189

1,533

24

119

2,084

Accumulated depreciation on disposal

-

-

(7)

-

-

(7)

Impairment

-

-

2,000

-

6,000

8,000

Effects of movement in foreign exchange

148

2

1,011

4

23

1,188

Balance at 31 December 2008

594

384

5,453

54

6,147

12,632

Net book value

At 31 December 2007

2,107

4,654

8,363

87

16,371

31,582

At 31 December 2008

2,701

5,035

12,772

72

16,844

37,424

The impairment of the Ghanaian assets has arisen as a result of the poor operational performance in the year and its forced divestment post year end. The recoverable amount has been assessed on a fair value less cost to sell basis which has been determined by reference to the directors' estimates of the consideration that would be received if sold on the open market.

Group

Company

2008

2007

2008

2007

12. Exploration and evaluation assets

in thousands of pounds sterling

Cost

Balance at 1 January

2,282

585

-

-

Additions

1,360

1,657

-

-

Effects of movement in foreign exchange

1,322

40

-

-

Balance at 31 December

4,964

2,282

-

-

Amortisation and impairment losses

Balance at 1 January

325

25

-

-

Impairment charge

170

300

-

-

Effects of movement in foreign exchange

64

-

-

-

Balance at 31 December

559

325

-

-

Carrying value

4,405

1,957

-

-

In Mali, at 31 December 2006 the Company held 43 prospecting titles under Mali Goldfields SA, and 3 under SonghoÏ Resources SA. These prospecting titles comprised a combination of Exploration Authorisations ("ADE" - Authorisation d'exploration) and Prospecting Permits ("PDR" - Permis de Recherche). Further regional geological studies, ground follow up mapping and soil geochemistry surveys were completed on all these properties during 2007. Due to a combination of a lack of geological prospectivity and poor results, 29 of these properties were deemed unprospective, and were released back to Mali Mineral Holdings, leaving a total of 18 licences. 

The prior year impairment charge is therefore in relation to capital expenditure incurred on the 29 prospecting licences that were deemed unprospective during the prior year, that were released back to Mali Mineral Holdings.

  

Group

Company

In thousands of pounds sterling

2008

2007

2008

2007

13. Inventories

Gold

-

540

-

-

Consumable stores

1,003

2,417

-

-

1,003

2,957

-

-

14. Trade and other receivables

Other trade receivables and pre-payments

1,452

580

35

36

1,452

580

35

36

15. Cash and cash equivalents

Bank balances

927

489

161

22

Restricted cash

2,978

2,332

-

-

3,905

2,821

161

22

Bank overdraft

(1,061)

-

-

-

2,844

2,821

161

22

The restricted cash balance of £2.978 million (2007: £2.332 million) is held in respect of the rehabilitation liability of £1.880 million (2007: £1.363 million) and a debt covenant with Investec Private Bank of £1.098 million (2007: £ 0.969 million). This cash is not available for use other than for these specific purposes.

  

16. Capital and reserves

Reconciliation of movement in capital and reserves

In thousands of pounds sterling

Share capital

Share premium

Foreign currency transla-tion reserves

Retained earnings

Total

Minority interest

Total equity

Group

Balance at 1 January 2007

459

26,389

68

(2,216)

24,700

39

24,739

Acquisition of minority interest relating to Motako Limited (note 27)

-

-

-

-

-

(34)

(34)

Total recognised expense

-

-

-

(14,732)

(14,732)

(5)

(14,737)

Share-based payments

-

-

-

2,192

2,192

-

2,192

Translation reserve

-

-

(289)

-

(289)

-

(289)

Shares issued

71

1,963

-

-

2,034

-

2,034

Balance at 31 December 2007

530

28,352

(221)

(14,756)

13,905

-

13,905

Balance at 1 January 2008

530

28,352

(221)

(14,756)

13,905

-

13,905

Total recognised expense

-

-

-

(26,684)

(26,684)

150

(26,534)

Share-based payments

-

-

-

756

756

-

756

Shares issued

324

15,273

-

-

 15,597

-

15,597

Translation reserve

-

-

(10)

-

(10)

-

(10)

Balance at 31 December 2008

854

43,625

(231)

(40,684)

 3,564

150

3,714

Company

Balance at 1 January 2007

459

26,389

-

(1,043)

25,805

-

25,805

Total recognised expense

-

-

-

(6,924)

(6,924)

-

(6,924)

Share-based payments

-

-

-

2,192

2,192

-

2,192

Shares issued

71

1,963

-

-

2,034

-

2,034

Balance at 31 December 2007

530

28,352

-

(5,775)

23,107

-

23,107

Balance at 1 January 2008

530

28,352

-

(5,775)

23,107

-

23,107

Total recognised expense

-

-

-

(35,541)

(35,541)

-

(35,541)

Share-based payments

-

-

-

756

756

-

756

Shares issued

324

15,273

-

-

15,597

-

15,597

Balance at 31 December 2008

854

43,625

-

(40,560)

3,919

-

3,919

  

Share capital and share premium

2008

2007

In thousands of pounds sterling

At 31 December 2008, the authorised share capital comprised 200,000,000 ordinary shares of 0.5p (2007: 200,000,000 of 0.5p)

Iissue at 1 January 2008: 106,079,962 shares (2007: 459,519,495)

530

459

Issued for acquisition of subsidiary (2007: 9,000,000)

-

9

Issued for cash 2008: 64,779,935 (2007: 25,000,000)

324

3

Issued for cash after 5 for 1 consolidation (2007: 11,876,063) 

-

59

Iissue at 31 December 2008 : 170,859,897 (2007: 106,079,962)

854

530

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. The Company also has quoted warrants in issue, and at 31 December 2008, 12.6 million were still outstanding in issue (31 December 2007: 17.6 million). The exercise price of the warrants is 1.0 p each with 5 warrants needing to be exercised per 1 ordinary share, after the 5 for 1 share consolidation that occurred after 15 June 2007, and the expiry date is 31 March 2011. A warrant is exercisable by the holder lodging a notice of subscription at the registered office of the Company accompanied by the remittance for the total subscription price of the ordinary shares in respect of which the subscription rights are being exercised. Once lodged, a notice of subscription is irrevocable save with the consent of the directors.

In thousands of pounds sterling

Number

Share

Share

Share

Date of issue

Notes

of shares

price

Capital

Premium

Total

1 March 2007

(i)

9,000,000

12.25p

9

1,093

1,102

11 April 2007

(ii)

2,500,000

1.00p

3

22

25

6 August 2007

(iii)

2,700,054

15.77p

13

413

426

22 August 2007

(iv)

1,175,513

5.00p

6

54

60

19 November 2007

(v)

8,000,496

5.26p

40

381

421

71

1,963

2,034

8 January 2008

(vi)

60,000,000

26.00p

300

14,566

14,866

21 January 2008

(vii)

200,000

15.55p

1

30

31

21 January 2008

(viii)

250,000

18.75p

1

46

47

18 March 2008

(ix)

407,074

15.55p

2

61

63

2 June 2008

(x)

1,000,000

5.00p

5

45

50

20 June 2008

(xi)

170,000

18.75p

1

31

32

9 July 2008

(xii)

2,752,861

18.75p

14

494

508

324

15,273

15,597

(i) The shares were issued to partly fund the acquisition of Falcon Gold Zimbabwe Limited and Olympus Gold Mine Limited in Zimbabwe. Refer to note 27.

(ii) The shares were issued though the exercise of 2,500,000 warrants of 0.1p. A share based payment of £224k was accounted for on this transaction and included in share-based payments. Refer to notes 7 and 9.

(iii) The shares were issued though the exercise of 2,700,054 share options of 0.5p, after the 5 for 1 share consolidation.

(iv) The shares were issued though the exercise of 5,877,565 warrants of 0.1 p, after the 5 for 1 share consolidation.

(v) The shares were issued though the exercise of 34,002,484 warrants of 0.1p and 1,200,000 share options of 0.5p, after the 5 for 1 share consolidation.

(vi) The shares were issued to fund ongoing operations

(vii) The shares were issued through the exercise of 200,000 options

(viii) The shares were issued through the exercise of 250,000 options

(ix) The shares were issued through the exercise of 407,074 options

(x) The shares were issued through the exercise of 5,000,000 warrants, after the 5 for 1 share consolidation

(xi) The shares were issued through the exercise of 170,000 options

(xii)The shares were issued to fund ongoing operations together with the convertible loan notes

Foreign currency translation reserve

This reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations that are not integral to the operations of the Company.

  

17. Basic and diluted loss per share

Basic loss per share

The calculation of basic loss per share at 31 December 2008 was based on the loss attributable to ordinary equity holders of the parent of £26.684 million (2007: £14.732 million) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2008 of 167,666,860 (2007: 96,199,572), calculated as follows:

Loss for the year attributable to equity holders of the parent

2008

2007

In thousands of pounds sterling

Loss for the year attributable to equity holders of the parent 

(26,684)

(14,732)

Weighted number of ordinary shares

Issued shares at 1 January

106,079,962

459,519,495

Effect of shares issued in January

59,274,657

-

Effect of shares issued in March

321,198

7,520,548

Effect of shares issued in April

-

1,808,219

Effect of consolidation of shares (5 for 1) in June 2007

-

(375,078,610)

Effect of shares issued in June

671,178

-

Effect of shares issued in July

1,319,865

-

Effect of shares issued in August

-

1,509,315

Effect of shares issued in November

-

920,605

Weighted number of ordinary shares at 31 December

167,666,860

96,199,572

Basic loss per share (pence)

(15.91p)

(15.31p)

Diluted loss per share

Due to the loss incurred, there is no dilutive effect from share options and warrants.

  

Group

Company

In thousands of pounds sterling

2008

2007

2008

2007

18. Loans and borrowings

Non current liabilities

Secured loan

-

9,701

-

-

-

9,701

-

-

Current liabilities

Secured loan

14,714

3,143

-

-

Convertible loan notes

4,995

-

4,995

-

19,709

3,143

4,995

-

Total

19,709

12,844

4,995

-

Secured bank loan

On 31 January 2007 Central African Gold Ghana Limited entered into a £7.510 million (US$15 million) facility with Investec Bank Limited.  The size of the facility was increased on 29 November 2007 by a further £ 5.007 million (US$10 million) with £0.327 million (US$0.655 million) being recognised as capitalised interest.

The main terms of the secured bank loan include:

a loan period of 5 years;

quarterly loan repayments (capital and interest) commencing in March 2008;

interest rate at LIBOR plus 2.5%;

various loan covenants;

a limit on other borrowing by Central African Gold Ghana Limited to the amount of US$5 million (£3.453 million; 2007: £2.503 million), except with Investec Bank Limited prior approval;

the loan is secured by means of pledges on shares in Central African Gold Ghana Limited, debentures granted by Central African Gold Ghana Limited over its assets and a subordination of a loan by Central African Gold Plc to Central African Gold Ghana Limited. Central African Gold Plc's guarantee is limited to US$5 million, or £3.453 million (2007: £2.503 million) plus capitalised interest; and

a gold sale agreement, refer to note 19.

Due to the delay in the publication of the 2007 annual report, the Company was not in compliance with the loan covenants governing the existing borrowings provided by Investec Bank Limited. The covenant in question required the annual report to be delivered within 90 days of the balance sheet date. 

As a consequence of an instalment not being met on the project finance facility, the liability has been classified as a current liability in accordance with the requirements of IAS1. 

Unsecured convertible loan notes

The first of the Convertible Loan Notes has been issued to Emerging Capital Partners Africa Fund II ("ECP") for $3.94 million (£2.17 million) and carries an interest coupon of 10 per cent. per annum, compounded monthly and payable within six months of the draw down date. Under the terms of this Convertible Loan Note, ECP may convert the Convertible Loan Note into new Ordinary Shares in the Company at the time of the next equity fundraising undertaken by the Company, at a price which is 10 per cent. below the issue price of such fundraising. In the event that the Company raises at least $10 million (£5.56 million) in such fundraising, the Convertible Loan Note and accrued interest will convert automatically. In addition, ECP has been granted options over 761,137 Ordinary Shares exercisable at a price of 0.5 pence per share for a period of 2 years from the date of their grant.

 

The second of the Convertible Loan Notes has been issued to Investec Asset Management (Proprietary) Limited ("Investec") for $3 million (£1.67 million) and also carries an interest coupon of 10 per cent. per annum, compounded monthly and payable on maturity. Under the terms of this Convertible Loan Note, Investec may convert the Convertible Loan Note into new Ordinary Shares in the Company at the time of the next equity fundraising undertaken by the Company, at a price which is 10 per cent. below the issue price of such fundraising. In the event that the Company raises at least $10 million (£5.56 million) in such fundraising, the Convertible Loan Note and accrued interest will convert automatically. In addition, Investec has been granted a warrant over 1,150,000 new Ordinary Shares at a price of 25 pence per share for a term of 2 years.

Investec Asset Management and ECP Africa agreed in December 2009 to defer the obligation to repay the loan notes to April 2011.

Group

Company

In thousands of pounds sterling

2008

2007

2008

2007

19. Other financial liabilities

Non current liabilities

Gold sale agreement

1,694

2,654

-

-

1,694

2,654

-

-

Current liabilities

Gold sale agreement

2,137

1,179

-

-

2,137

1,179

-

-

3,831

3,833

-

-

  

Gold sale agreement

Central African Gold Ghana Limited entered into various gold sale agreements with Investec Bank Limited, in which the contract price of gold per ounce was fixed. On initial recognition the fair value of the derivatives was recognised in the income statement and a liability created since the normal purchase and sales exemption as allowed in terms of IAS 39 could not be applied. Subsequently the fair value of the derivative is accounted for at fair value through the income statement.

As at 31 December 2008, Central African Gold Ghana Limited had outstanding gold sale agreements with Investec Bank Limited for 18,320 ounces (2007: 55,660 ounces), maturing between 30 January 2009 and 26 February 2010). The average contract price of these agreements was at US$748.11 (2007: US$732.05) per ounce. The spot rate as at 31 December 2008 was US$866.55 per ounce (2007: US$833.20). As a result of these gold sale agreements a financial liability has been recognised to the amount of £3.831 million (US$7.654 million).

20. Deferred tax liability

Group

Company

In thousands of pounds sterling

2008

2007

2008

2007

Arising on property, plant and equipment on Bibiani 

-

318

-

-

Arising on property, plant and equipment on Falcon Gold and Olympus

563

537

-

-

563

855

-

-

The group has unrecognised deferred tax assets of £10.6 million (2007: £10.6 million) in respect of estimated tax losses carried forward.

The Company has not recognised deferred tax assets in respect of estimated tax as the directors currently do not believe utilisation of those losses to be sufficiently certain.

  

21. Provisions

Group

Company

In thousands of pounds sterling

2008

2007

2008

2007

Rehabilitation provision

Balance at 1 January

1,773

1,389

-

-

Additional provision for the year

675

340

-

-

Unwinding of interest for the year (note 4)

-

68

-

-

Effect of movements in foreign exchange

792

(24)

-

-

Balance at 31 December

3,240

1,773

-

-

Decommissioning provision

Balance at 1 January

1,389

1,389

-

-

Additional provision for the year

150

-

-

-

Reductions from re-measurement

(65)

-

-

-

Interest charge

(73)

-

-

-

Effects of movement in foreign exchange

531

-

-

-

Balance at 31 December

1,932

1,389

-

-

Other provisions

Balance at 1 January

91

-

38

-

Additional provision for the year

 41

91

40

38

Reductions arising from payments

(48)

-

-

-

Effects of movement in foreign exchange

4

-

-

-

Balance at 31 December

88

91

78

38

Total provisions

5,260

3,253

78

38

The rehabilitation provision relates to environmental obligations arising from mine development and has to be settled on mine closure. The cost is capitalised as part of the related asset to be amortised over the life of the mine. The expected timing of the outflow is after 10 years.

The decommissioning provision relates to environmental obligations during the development phase and has to be settled on mine closure.  The cost is capitalised as part of the related asset to be amortised over the life of the mine.  The expected timing of the outflow is after 10 years.

  

The amounts provided for the rehabilitation provision and the decommissioning provision have been adjusted for inflation and the time value of money. A 10% variation, either up or down, is a reasonable measure of uncertainty regarding the provisions. The provisions do not take into account future events and are based on estimated liabilities already incurred.

The leave pay provision is based on the leave days due as at the end of the current year multiplied by the per day cost to the Company.

Group

Company

In thousands of pounds sterling

2008

2007

2008

2007

22. Trade and other payables

Other trade payables

14,729

5,694

413

1,064

14,729

5,694

413

1,064

23.  Financial risk management

The group has exposure to the following risks from its use of financial instruments in the normal course of the groups' business: credit risk, liquidity risk and market risk. This note presents information about the group's exposure to each of the above risks, the group's objectives, policies and process for measuring and managing risk and the group's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Credit risk

Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet its contractual obligation, and arises principally from the group's receivables from customers and investment securities.

Trade and other receivables

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The group does not require collateral in respect of financial assets.

At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

  

The age analysis of trade and other receivables not impaired at reporting date:

Group

Company

In thousands of pounds sterling

2008

2007

2008

2007

Current

275

-

-

30 days past due date

-

5

-

-

31 - 60 days past due date

-

53

-

2

61 - 90 days past due date

-

55

-

-

More than 91 days past due date

1,452

192

34

34

1,452

580

34

36

Investments

Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the group. Transactions involving derivative financial instruments are with counterparties with whom the Group has a signed netting agreement as well as sound credit ratings. Given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.

Liquidity risk

Liquidity risk is the risk that the group will not be able meet its financial obligations as they fall due.

It is the group's policy to finance its business by means of internally generated funds supported by the groups' bankers, other lenders and external share capital.  Facilities are regularly reviewed by the Board.

The group manages its cash flows on a day to day basis from the centre, considering currencies in each market. As a result the liquidity risk is monitored closely throughout the group.

The table that follows summarises the group's exposure to liquidity risk. Included in the table are the group's financial assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.  

Group

In thousands of pounds sterling

Up to 1 

month

1 - 3 

months

3 - 12 

months

Beyond 12 months

Total

2008

Financial assets

Current assets

Trade and other receivables

-

-

1,452

-

1,452

Cash and cash equivalents

927

-

-

-

927

Total financial assets

927

-

1,452

-

2,379

Financial liabilities

Current liabilities

Loans and borrowings - current portion

(4,995)

(902)

(2,708)

(11,104)

(19,709)

Other liabilities - current portion

(232)

(343)

(1,562)

(2,137)

non current portion

(1,694)

(1,694)

Trade and other payables

(14,729)

-

-

(14,729)

Cash and cash equivalents

(1,061)

-

-

-

(1,061)

Total financial liabilities

(21,017)

(1,245)

(4,270)

(12,798)

(39,330)

Net liquidity gap analysis

(20,090)

(1,245)

(2,818)

(12,798)

(36,951)

In thousands of pounds sterling

Up to 1 

month

1 - 3 

months

3 - 12 

months

Total

2007

Financial assets

Current assets

Trade and other receivables

275

113

192

580

Cash and cash equivalents

2,769

(77)

129

2,821

Total financial assets

3,044

36

321

3,401

Financial liabilities

Current liabilities

Loans and borrowings - current portion

-

(811)

(2,332)

(3,143)

Other liabilities - current portion

-

-

(1,179)

(1,179)

Trade and other payables

(5,694)

-

-

(5,694)

Total financial liabilities

(5,694)

(811)

(3,511)

(10,016)

Net liquidity gap analysis

(2,650)

(775)

(3,190)

(6,615)

Company

In thousands of pounds sterling

Up to 1 

month

1 - 3 

months

3 - 12 

months

Beyond 12 months

Total

2008

Financial assets

Current assets

Trade and other receivables

-

-

35

-

35

Cash and cash equivalents

161

-

-

-

161

Total financial assets

161

-

35

-

196

Financial liabilities

Current liabilities

Loans and borrowings - current portion

(4,995)

-

-

-

(4,995)

Trade and other payables

(413)

-

-

-

(413)

Total financial liabilities

(5,408)

-

-

-

(5,408)

Net liquidity gap analysis

(5,247)

-

-

-

(5,212)

In thousands of pounds sterling

Up to 1 

month

1 - 3 

months

3 - 12 

months

Total

2007

Financial assets

Current assets

Trade and other receivables

-

-

36

36

Cash and cash equivalents

22

-

-

22

Total financial assets

22

-

36

58

Financial liabilities

Current liabilities

Trade and other payables

(1,064)

-

-

(1,064)

Total financial liabilities

(1,064)

-

-

(1,064)

Net liquidity gap analysis

(1,042)

-

-

(1,006)

  

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risks being currency risk, interest rate risk and price risk.

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The group is exposed to foreign currency risk on sales, purchases and expenditures that are denominated in a currency other than the functional currency. The currencies giving rise to this risk are primarily the U.S. Dollar, Malian FCFA's and the South African Rand.

In respect of other monetary assets and liabilities held in currencies other than the functional currency, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.

The following significant exchange rates applied during the year:

Average rate

Reporting date spot rate

Against £ sterling

2008

2007

2008

2007

US dollars

1.86

2.01

1.45

1.99

FCFA

842.78

955.10

684.59

890.18

ZAR

15.18

14.11

13.70

13.69

 

  

Sensitivity analysis

A 10 percent strengthening of the pound sterling against the following currencies at 31 December 2008 would have increased (decreased) equity and profit and loss by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.  The analysis is performed on the same basis for 2007.

In thousands of pounds sterling

Equity

Profit and loss

31 December 2008

US dollars

1,703

1,082

FCFA

(45)

(68)

ZAR

301

96

31 December 2007

US dollars

(306)

(306)

FCFA

(3)

(3)

ZAR

(75)

(75)

A 10 percent weakening of the pound sterling against the above currencies at 31 December 2008 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The interest rate risk profile of the group's financial assets as at 31 December 2008 was

In thousands of pounds sterling

Fixed rate

Floating rate

Total

US dollars

-

2,819

2,819

Sterling

-

-

-

FCFA

-

12

12

ZAR

-

13

13

Cash at bank and in hand

-

2,844

2,844

The interest rate risk profile of the group's financial assets as at 31 December 2007 was

US dollars

-

2,698

2,698

Sterling

-

22

22

FCFA

-

78

78

ZAR

-

23

23

Cash at bank and in hand

-

2,821

2,821

Floating rate deposits earn interest at prevailing bank rates.

The group's policy on interest rate management is agreed at board level and is reviewed on an ongoing basis.

Capital management

The board's policy is to maintain a capital base that is appropriate to retaining investor and creditor confidence and sustain operations. The board monitors long-term internal rates of return (IRR) and net present values (NPVs) at varying hurdle rates to be satisfied that any project is commercially viable.

The board seeks a return of 20% on equity on new projects. This is defined as the present value of net operating income on shareholders' equity.

There were no changes in the group's approach to capital management during the year.

Central African Gold Ghana Limited is not permitted to borrow more than of £2.5 million (US$5 million) without the prior permission of Investec Bank Limited.

Fair value

The face values less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values.  The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the scheme for similar financial instruments.

There is no material difference between the fair value of borrowings and other financial instruments and their book value at the balance sheet date.

24. Commitments and contingencies

Mali

The Company and Mali Mining House (MMH) entered into an agreement on 9 December 2005.  The agreement provides that the subsidiary, Mali Goldfields SA, will be initially owned as to 80% by the Company and 20% by MMH, subject to a potential reduction in the interest of each party by 5% (ie to 75% and 15% respectively) in the event that the Government of Mali exercises its right to receive a 10% free-carried interest.

The Company also entered into an agreement with Mani on 26 July 2006, to explore three gold exploration permits in western Mali.  The agreement provided for the establishment of a subsidiary, SonghoÏ Resources SA, which would initially be owned as to 80% by the Company and 20% by Mani.  The Company is to provide the required funding for the subsidiary, subject to the reimbursement of amounts spent before the repayment of dividends.  With respect to one permit (Medinandi), the Company provided the finance for the purchase of the permit and an option for the Malian company to acquire at a price determined by an expert to be 2.5% of the capital of any company established to exploit Medinandi (in which case the interest of the parties would be 77.5% for the Company, 20% Mani and 2.5% the vendor, or if the Government of Mali exercised its right to obtain a 10% free-carried interest, 72.5% for the Company, 15% for Mani, 2.5% the vendor and 10% the Government of Mali). These agreements will form part of the consideration for the disposal of the Company's Malian assets referred to in note 29.

 

25. Related parties

Company

In thousands of pounds sterling

2008

2007

Amount due from subsidiaries

Central African Gold Technical Services (Pty) Ltd

1,254

601

Mali Goldfields SA

2,202

1,657

SonghoÏ Resources SA

935

646

Central African Gold Ghana Limited

12,700

12,016

Falcon Gold Mines Limited

1,384

654

Motako Limited

17

1

18,492

15,575

Impairment

(12,717)

-

5,775

15,575

The amounts due by subsidiaries and the amount due to subsidiaries are interest free, immediately repayable and therefore have been classified as current assets and current liabilities respectively. No other payment terms are in place. 

The impairment relates to Central African Gold Ghana Limited and Motako Limited.

Company

2008

2007

Amount due to subsidiaries

Central African Gold Ghana Limited

-

1,763

-

1,763

Transaction with key management personnel

The compensation of key management personnel including the directors is as follows:

Key management emoluments

466

490

Share based payment expense

756

2,192

26. Investment in subsidiaries

In thousands of pounds sterling

Country of

Functional

Ownership

Company

incorporation

currency

Interest

Investment

2008

2007

2008

2007

Central African Gold Technical Services (Pty) Ltd

South Africa

Rands

100%

100%

-

-

Mali Gold Fields SA

Mali

FCFA's

80%

80%

20

20

SonghoÏ Resources SA

Mali

FCFA's

80%

80%

11

11

Central African Gold Ghana Limited

Ghana

US$

100%

100%

6,549

6,549

Falcon Gold Zimbabwe Limited

Zimbabwe

US$

84.7%

84.7%

3,402

3,402

Olympus Gold Mines (Pvt) Ltd

Zimbabwe

US$

100%

100%

-

-

Motako Limited

Botswana

BWP

100%

100%

357

357

10,339

10,339

Company investment

Cost at beginning of year

10,339

6,803

Additions

-

3,536

Impairments

(6,905)

-

Carrying value at end of year

3,434

10,339

27.6 per cent. of the investment in Falcon Gold Zimbabwe Limited is held via a trustee arrangement for the benefit of CAG.

The investments in Central African Gold Ghana Limited and Motako Limited have been impaired. 

  

27. Acquisitions

Zimbabwe

During the 2007 financial year the group acquired 84.7% of Falcon Gold Zimbabwe Limited and 100% of Olympus Gold Mines (Pvt) Limited in Zimbabwe.  

The values of the net assets acquired are as follows:

In thousands of pounds sterling

Book value at date of acquisition

Fair value adjustment

Estimated fair value at time of acquisition

Property, plant and equipment

199

3,340

3,539

Inventory

169

169

Receivables

31

31

Cash and cash equivalents

81

81

Payables and accruals

(387)

(387)

Deferred tax

(31)

(501)

(532)

Total fair value of net assets acquired

62

2,839

2,901

Goodwill (note 10)

501

3,402

The purchase consideration was settled as follows:

Cash

2,300

Shares

1,102

3,402

9,000,000 shares were issued to satisfy the purchase consideration at a price of 12.25p. Refer to note 16.

From 1 March 2007, the results of Falcon Gold Zimbabwe Limited and Olympus Gold Mines (Private) Limited included in the financial statements were:

Net loss before tax

472

Taxation

9

Net loss

481

Botswana

On 1 October 2007 the group acquired the remaining 47.94% of Matoko (Pty) Limited. Further details of the operations are disclosed in the directors' report.

At the point of acquisition the book value of assets was £109,000. After fair value adjustments of £129,000 the total fair value of the asset base was £232,000. The company acquired the 47.94% of the assets for £111,000.

From 1 October 2007, the results of Matoko Limited included in the financial statements were

Net loss before tax

239

Taxation

-

Net loss

239

  

On 1 October 2007, the group acquired 100% of the issued shares and liabilities in Matoko Limited. Matoko Limited was a wholly owned subsidiary of Golden Tau Limited. The group already controlled 52.06% of Golden Tau Limited. Following the acquisition of all shares held by the group in Golden Tau Limited were cancelled. As part of the transaction Golden Tau Limited assigned to the group an unsecured interest free loan of £157,000 (AU$363,000) extended by Golden Tau Limited to Matoko Limited to fund its exploration activities to date on the tenement.

The remaining minority interest in Golden Tau Limited was reversed as part of the transaction. Refer to note 16.

28. Post balance sheet events

On 14 January 2009, the Company's wholly owned subsidiary, Central African Gold Ghana Limited received a notice of default from Investec Bank regarding the non-payment of monies due on the Investec Bank project loan facility agreement (the "PLFA") and the non-payment of monies due under various gold forward transaction agreements (the "HFA") with Investec Bank.  Investec demanded a full repayment of more than $20 million from the company.

In addition to the demand for repayment, Investec invoked its power of attorney under the charge over the Company's shares in Central African Gold Ghana Limited and transferred the 90,000 shares in CAG Ghana to Investec Bank, making it the legal owner of Bibiani.

A settlement agreement was entered into between the Company and Investec Bank which limited the company's liability to $5.0 million. Pursuant to this, the Company announced that subject to shareholder approval, CAG proposed to raise $8.0 million (before expenses) and to proceed with the partial conversion of the convertible loan notes issued in July 2008.

Shareholder approval was sought and received for an increase in the authorised share capital to accommodate the issue of 565,970,992 new ordinary shares at 1.00 pence (the "Placing") and to issue shares at 0.9 pence per share in respect of the partial conversion of the loan notes (the "Conversion").  The net proceeds of approximately £5.7 million before costs were used predominantly to settle the outstanding liability to Investec Bank.

The board of directors announced that it would dispose of the Mali assets on 21 December 2009. Whilst a number of offers were received, the cash component of the offers was considerably less than the board anticipated. As a result, the board believed that the cash likely to be available to the Company, subsequent to the disposal, would not be sufficient to repay the amounts due to Investec Asset Management and ECP Africa under the new loan agreements, together with the other creditors of the company as they fell due.

29. Post Balance Sheet events (continued)

To this end, CAG approached both Investec Asset Management and ECP Africa seeking a deferral of the Company's obligations under the new loan agreements. Investec Asset Management (Pty) Limited ('IAM') and ECP have agreed to extend the terms of the loans made available to the Company as described in a circular sent to shareholders on 27 March 2009, amounting to US$2.2 million and US$1.8 million respectively. These loans now have a new maturity date of 29 April 2011 (previously the earlier date of 14 April 2010 or within five days of the receipt of funds by the Company from the sale of its entire shareholding in Mali Goldfields SA and Songhoï Resources SA).

Additionally, CAG has entered into new Convertible Loan Agreements ('the Convertible Loan Agreements') with HBD Zim Investments Limited ('HBD'), ECP and IAM, (together, 'the Lenders'). The Convertible Loan Agreements total circa US$1.25 million (approximately £814,000) and amount to US$397,267 from HBD (approximately £238,924), US$705,070 from EPC (approximately £424,048) and US$147,662 from IAM (approximately £88,808). Sterling loan amounts are calculated using the rate of exchange prevailing on the date of the agreements. The funds received by the Company under the Convertible Loan Agreements carry interest at 10 per cent. per annum, compounded monthly in arrears with the full amount payable on the maturity date, 29 April 2011. There is no penalty for early repayment of the loans. 

The terms of the Convertible Loan Agreements provide that the Lenders have the right to convert all, but not part, of the loans at the conversion price of the lesser of 0.9 pence per ordinary share and ten (10) percent below the USD equivalent of any price at which the Borrower issues Shares while any amount of the Loan remains repayable to the Lender. Under the terms of the Convertible Loan Agreements each of the Lenders acknowledge that the Company does not have the capacity to issue the full number of shares issuable should they wish to convert the loans and that, should the Company not receive the required shareholder approval needed to create and issue all of the shares issuable on conversion, the Lenders shall only be able to exercise their conversion rights to the extent that such shares exist and the directors have the relevant authorities.

As announced on 21 December 2010, the Company has entered into a binding agreement to dispose of its 80 per cent. equity interests in each of Mali Goldfields SARL and Songhoï Resources SA (together 'the Malian Assets') ('the Disposal') to Colonial Resources Limited ('Colonial') ('the Agreement') for a total consideration of US$5.0 million ('the Consideration'). As at 31 December 2008, the Malian Assets, which are early stage gold exploration assets, consisting of 18 prospective permits spanning circa 2,137 sqkm of the Birimian strata, were recorded as having a book value of £3.8 million. By 30 November 2009 this had reduced to 18 prospective permits covering an area of 1,883 sq km.

 

30. 2007 Comparative numbers

2007

Income statement

in thousands of pounds sterling

Note

Group ex

Ghana

Ghana

Total

Revenue

2,603

8,362

10,965

Cost of sales

(2,819)

(9,126)

(11,945)

Gross loss

(216)

(764)

(980)

Other operating income

-

41

41

Administrative charges

(7,971)

(1,676)

(9,647)

Other administrative expenses

(5,779)

(1,676)

(7,455)

Share based payments

7,9

(2,192)

-

(2,192)

Operating loss 

(8,187)

(2,399)

(10,586)

Financial income

3

169

137

306

Financial expenses

4

(330)

(4,165)

(4,495)

Other financial expenses

(330)

(332)

(662)

Gold sale agreement valuation

-

(3,833)

(3,833)

Loss before tax

(8,348)

(6,427)

(14,775)

Taxation

5

(10)

48

38

Loss for the year

(8,358)

(6,379)

(14,737)

2007

in thousands of pounds sterling

Note

Group ex

Ghana

Ghana

Total

Assets

Goodwill

10

501

-

501

Property, plant and equipment

11

1,833

29,749

31,582

Exploration and other evaluation assets

12

1,957

-

1,957

Total non-current assets

4,291

29,749

34,040

Inventories

13

30

2,927

2,957

Trade and other receivables

14

301

279

580

Cash and cash equivalents

15

135

2,686

2,821

Total current assets

466

5,892

6,358

Total assets

4,757

35,641

40,398

Equity

Share capital

16

530

-

530

Share premium

16

28,352

-

28,352

Foreign currency translation reserve

16

(211)

(10)

(221)

Accumulated loss

16

(26,232)

(40,684)

(14,756)

Total equity attributable to equity holders of the parent

 2,623

11,281

13,905

Minority interest

-

-

-

Total equity

2,625

11,281

13,905

Liabilities

Loans and other borrowings

18

-

9,701

9,701

Other financial liabilities

19

-

2,654

2,654

Deferred taxation

20

406

449

855

Provisions

21

91

3,162

3,253

Total non-current liabilities

497

15,966

16,463

Loans and borrowings - current portion

18

-

3,143

3,143

Other financial liabilities - current portion

19

-

1,179

1,179

Trade and other payables

22

1,635

4,059

5,694

Taxation

1

13

14

Total current liabilities

1,636

8,394

10,030

Total liabilities

2,132

24,360

26,493

Total equity and liabilities

4,757

35,641

40,398

Glossary

AGA AngloGold Ashanti

AIM Alternative Investment Market

Au gold

Ba billion years

bcm bank cubic metres

Bibiani Bibiani gold mine

BIF Banded Iron Formation

CAG Central African Gold PLC

CIL Carbon-in-Leach

CPR Competent Person's Report

DCF Discounted Cash Flow

DD diamond drilling

EM electro-magnetic

EPA Environmental Protection Agency

EPO exclusive prospecting order

g/t grams per tonne

GAAP Generally Accepted Accounting Principles

GIS Geographical Information Systems

GTML Golden Tau Mining Limited

Ha hectare

Hr hour

IFRS International Financial Reporting Standards

Koz thousand ounces

Kt thousand tonnes

JORC Joint Ore Reserves Committee of the Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia

JV joint venture

km kilometre

Kt thousand tonnes

Ktpa thousand tonnes per annum

Ktpm thousand tonnes per month

kV thousand volts

kW thousand watts

LHD Load-Haul-Dump

LSE London Stock Exchange

M million

m metre

Ma million years

MMH Mali Mining House

Moz million ounces

Mtpa million tonnes per annum

MW mega watts (1 mega watt = 1 million watts)

N north

N/A not applicable or not available

NPV net present value

oz ounce

RC reverse circulation percussion drilling

ROM run-of-mine

SAG semi-autogenous grinding

SGMC State Gold Mining Corporation

Snowden Snowden Mining Industry Consultants (Pty) Ltd

t tonne

tpa tonnes per annum

UG underground

US$ United States dollar

Definitions

Acid rock An igneous rock with 10% or more of free quartz.

Adit A horizontal entrance or passage in a mine.

Albite A variety of feldspar found in felsic rocks.

Alteration Change in mineral and chemical composition of rock, commonly brought about by reactions to weathering or to hydrothermal solutions.

Anomaly An area where exploration has revealed results higher (or sometimes lower) than the local background level.

Anomalous A departure from the expected norm. In mineral exploration this term is generally applied to either geochemical or geophysical values higher or lower than the norm.

Archaean The oldest rocks of the Earth's crust -older than 2,400Ma.

Aeromagnetics Geophysical technique utilized from an airborne aircraft.

Arsenopyrite Ore mineral of arsenic (FeAsS).

Basalt A dark, fine-grained volcanic rock of low silica (

Basement The igneous and metamorphic crust of the earth, underlying sedimentary deposits. Birimian Volcanic arc, metasedimentary and granitoid terranes prevalent in west Africa aged 2,200-1,800Ma.

Breccia Rock comprising angular fragments enclosed in a matrix.

Bulk density The weight of a material divided by the volume it occupies (including pore spaces).

Carbonate Common mineral type consisting of carbonates of calcium, iron, and/or magnesium.

Chalcopyrite A common sulphide ore of copper,CuFeS2

Channel sampling Sampling taken from the wall of a mine opening, or along a surface exposure, trench or costean, in which a furrow is made and the entire sample combined for analysis. Channel samples are commonly, but not always, collected over continuous one metre intervals.

Chert A hard, extremely fine grained sedimentary rock consisting almost entirely of interlocking quartz crystals, of which flint is a dark variety.

Craton Large, and usually ancient, stable mass of the earth's crust.

Cyanidation A method of extracting gold by dissolving it in a weak cyanide solution.

Diamond drilling Mineral exploration hole completed using a diamond set or diamond impregnated drill bit for retrieving a cylindrical core of rock.

Diorite A dark, coarse grained intrusive igneous rock composed of feldspar and iron and magnesium rich minerals.

Dip The angle at which a rock stratum or structure is inclined from the horizontal.

Disseminated Said of particles distributed finely and evenly throughout a matrix.

Dolerite A medium grained basic intrusive rock composed mainly of pyroxenes and sodium calcium feldspar.

Dyke A tabular intrusion of igneous rock that cuts across the planar structure of the surrounding rock.

Epigenetic Mineralisation deposited later than the enveloping rocks.

Fault A fracture or fracture zone, along which displacement of opposing sides has occurred.

Feasibility study An advanced study undertaken to determine the economic viability of a mineral deposit to a high degree of accuracy.

Felsic Light colour rocks containing an abundance of any of the minerals feldspar, feldspathoid and silica.

Fire assay Analytical technique that extracts precious metals under high temperatures in a furnace.

Foliation The banding or lamination of metamorphic rocks as distinguished from stratification in sedimentary rocks.

Footwall The underlying side of a fault, orebody or mine working.

Geochemical exploration Used in this report to describe a prospecting technique which measures the content of certain metals in soils and rocks and defines anomalies for further testing.

Geophysical exploration The exploration of an area in which physical properties (e.g. resistivity, gravity, conductivity, magnetic properties) unique to the rocks in the area are quantitatively measured by one or more geophysical methods.

Geophysical survey A survey measuring the physical properties of a rock mass, typically recording the magnetic, electrical or radiometric properties. Commonly used to assist in determining the nature of the sub-surface rock mass.

Gneiss A metamorphic rock of coarse grain size, usually exhibiting banding.

Granitoid A general term to describe coarse grained felsic intrusive igneous rocks, resembling granite.

Granodiorite A coarse-grained igneous rock containing quartz, plagioclase (sodium-calcium) feldspar and potassium feldspar with biotite, hornblende or pyroxene.

Gravimetric concentration The quantitative determination of a substance by precipitation followed by isolation and weighing of the precipitate.

Greenschist facies Conditions of metamorphism characterised by chlorite, epidote and/actinolite.

Greenstone A collective term for slightly altered mafic igneous rocks.

Haematite (hematite) Common iron oxide mineral (Fe2O3).

Hangingwall The overlying side of a fault, orebody or mine working.

Hydrothermal A term applied to magmatic emanations rich in water and to the alteration products and mineral deposits produced by them.

Igneous A rock that has solidified from molten material or magma.

Intermediate A rock unit which contains a mix of felsic and mafic minerals.

Intrusion/intrusive A body of igneous rock that invades older rocks.

JORC The Joint Ore Reserves Committee (Australia).

Laterite A cemented residuum of weathering generally leached in silica with a high alumina and/or iron content.

Limestone A sedimentary rock containing at least 50% calcium or calcium-magnesium carbonates.

Lineament A significant linear feature of the earth's crust, usually equating a major fault or shear structure.

Lithology A term pertaining to the general characteristics of rocks. It generally relates to descriptions based on hand sized specimens and outcrops rather than microscopic or chemical features.

Lode deposit A vein or other tabular mineral deposit with distinct boundaries.

Mafic Pertaining to, or composed dominantly of, the dark coloured ferromagnesian rock forming silicates.

Mafic volcanic Volcanic rocks dominantly comprised of ferromagnesian minerals.

Mesozoic The era of geologic time that encompasses the Jurassic, Triassic and Cretaceous (i.e. 195 to 64Ma ago)

Metallogenic Association of metal ores that is peculiar to a particular region, or period of time.

Metamorphism The process of altering a rock by temperature and/or pressure.

Metasediments Metamorphosed sedimentary rocks.

Mineral resource A mineral resource is a concentration (or occurrence) of material and economic interest in or on the earth's crust in such form, quality and quantity that there are reasonable and realistic prospects for eventual economic extraction. The location, quantity, grade, continuity and other geological characteristics of a mineral resource are known, estimated from specific geological evidence and knowledge, or are interpreted from a well-constrained and portrayed geological model. Mineral resources are subdivided in order of increasing confidence in respect of geoscientific evidence into inferred, indicated and measured categories.

Miocene A period of geological time from 5 to 23.5Ma.

Nappe A large, sheet-like body of rock which has been transported from its original position.

Ore reserve An ore reserve is the economically mineable material derived from a measured and/or indicated mineral resource. It is inclusive of diluting materials and allows for losses that may occur when the material is mined. Mineral reserves are subdivided in order of increasing confidence into probable mineral reserves and proven mineral reserves.

Orogeny A deformation and/or magmatic event in the earth's crust, usually caused by collision between tectonic plates. The process of mountain making especially by folding of the earth's crust.

Oxide zone Near surface material affected by weathering and leaching of minerals.

Palaeozoic The era ranging from 600 to 230Ma ago.

Phyllite A metasedimentary rock displaying a platy cleavage and low sheen.

Pleistocene The period of time basically covering the glacial periods extending from 1.8 to 0.01Ma ago.

Plunge The inclination of a linear geological structure from the horizontal.

Pluton A general term for a large igneous intrusion.

Porphyry An igneous rock that contains conspicuous crystals in a fine grained matrix.

Potassic alteration The chemical alteration of a rock by potassium-rich fluids to produce potassium rich minerals.

Precambrian The period of time between the consolidation of the Earth's crust and the beginning of life - approximately 4.5Ba ago to 530 ± 40Ma ago.

Proterozoic Between 2,500Ma and 542Ma ago. Divided into the Paleoproterozoic (2,500-1,600Ma), Mesoproterozoic (1,600-1,000Ma) and Neoproterozoic (1,000 - 542Ma) periods.

Pyrite An iron sulphide mineral FeS2

Pyrrhotite An iron sulphide mineral, FeS (n-1).

Quartz Mineral species composed of crystalline silica.

Quartzite A quartz-rich sandstone that has been metamorphosed or indurated by the recrystallisation of silica.

Quartzofeldspathic Compositional term relating to rocks containing abundant quartz and feldspar, commonly applied to metamorphic and sedimentary rocks.

Radiometric survey Survey measuring the gamma radiation emitted from the isotopes or daughter products of potassium, uranium and thorium. Often done in conjunction with airborne magnetic surveys.

Regolith The layer of weathered and transported material overlying fresh rock. The regolith includes such things as weathered and fractured bedrock, saprolite, alluvium and colluvium.

Sandstone A sedimentary rock composed of cemented or compacted detrital minerals, principally quartz grains.

Schist A micaceous crystalline metamorphic rock having a foliated structure due to the recrystallisation of the constituent minerals.

Sediment A rock formed of particles which were deposited from suspension in water, wind or ice. Sericite A white or pale apple green potassium mica, very common as an alteration product in metamorphic and hydrothermally altered rocks.

Shaft A vertical or inclined tunnel from the surface, through which underground excavations can be entered and by which ore and waste may be removed.

Shear zone A zone in which shearing has occurred on a large scale, such that the rock is deformed dominantly by ductile deformation.

Silicification Replacement by, or introduction of, appreciable quantities of silicon dioxide minerals.

Siltstone A rock intermediate in character between shale and sandstone. Composed of silt sized grains. Skarn An alteration halo of iron-rich minerals formed in carbonate rocks by contact metasomatic replacement of the original carbonate-rich rock mass.

Stockwork A network of (usually) quartz veinlets of varying orientation, produced during pervasive brittle fracture.

Stratabound Restricted to a particular stratigraphic unit or part of the stratigraphic column.

Stratiform Parallel to bedding and with limited development perpendicular to it.

Strike The direction of bearing of a bed or layer of rock in the horizontal plane.

Strike-slip The horizontal component of the slip parallel with the fault strike.

Subduction Term to describe plates of oceanic crust descending beneath continental crust.

Sulphide ore Mineralisation characterised by compounds of metals and sulphur.

Tertiary A period of geological time from 1.8 to 66 Ma ago.

Thrust fault A low angle (shallowly inclined) fault or shear on which the rocks on the top have moved up and over the rocks on the bottom.

Treated Processed through the mine's process plant.

Turbidite Sedimentary deposits formed through fluidised flow.

Ultramafic Referring to an igneous rock in which more than 90% of the minerals are ferromagnesium minerals, with only trace quartz and feldspar.

Vein A thin infill of a fissure or crack, commonly bearing quartz.

Registered and Head Office

Millennium Bridge House

2 Lambeth Hill

London EC4V 4AJ

United Kingdom

Company Secretary

Philip Enoch

Nominated Adviser and Broker

Strand Hanson Limited

26 Mount Row

London W1K 3SQ

United Kingdom

Solicitors to the Company

Salans LLP

Millennium Bridge House

2 Lambeth Hill

London EC4V 4AJ

United Kingdom

Auditors, Reporting

Accountants and Tax Advisers

KPMG Audit Plc

Mining and Metals

8 Salisbury Square

London

EC4Y 8BB

United Kingdom

Registrars

Capita Registrars

Northern House

Woodsome Park

Fenay Bridge

Huddersfield

Yorkshire

HD8 0GA

United Kingdom

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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