16th Oct 2017 15:00
Central Rand Gold Limited (Incorporated as a company with limited liability under the laws of Guernsey, Company Number 45108) (Incorporated as an external company with limited liability under the laws of South Africa, Registration number 2007/019223/10) ISIN: GG00B92NXM24 LSE share code: CRND JSE share code: CRD ("Central Rand Gold" or the "Company" or the "Group")
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Annual Results and Annual Report Release |
Central Rand Gold today announces its annual results for the year ended 31 December 2016.
Full copies of the Company's Annual Report and Accounts, including the Company Profile, Chairman's Report, Corporate Governance, Sustainable Development Report, Company Secretarial Confirmation, Remuneration Committee Report, Directors' Report, Auditor's Report and full Financial Statements, will be available on the Company's website www.centralrandgold.com on 16 October 2017.
For further information, please contact:
Central Rand Gold +27(0) 87 310 4400
Lola Trollip
ZAI Corporate Finance Ltd - Nominated Adviser +44 (0) 20 7060 2220
John Treacy
Peterhouse Corporate Finance Limited - Broker +44 (0) 20 7469 0930
Lucy Williams / Fungai Ndoro
Merchantec Capital - JSE Sponsor +27 (0) 11 325 6363
Marcel Goncalves / Monique Martinez
Chairman's report
Dear Shareholder
I write in the slightly unusual circumstances of not having served as your Company's Chairman for the financial year under review in these financial statements, but I am able to provide an overview of the principal matters involving the Company since the end of that financial year.
OUTGOING DIRECTORS
Shareholders will have noted the departure of Nathan Taylor as interim Non-executive Chairman and Mark Austin as Non-executive Director in January 2017. Lola Trollip has tendered her resignation as the Company's Chief Executive Officer and as a Director of the companies in the Group. We are agreeing her final departure date.
ADVISER APPOINTMENTS
We appointed new advisers, Brandon Hill Capital and ZAI Corporate Finance Limited, post year end as our broker and nominated adviser respectively. Their assistance and wise advice has been invaluable and I should like to thank them for accepting their respective appointments and for their input since their appointments. Brandon Hill assisted us with a fundraising in very difficult circumstances and their advice and input was much appreciated. We have subsequently appointed Peterhouse Corporate Finance Limited as broker in the light of the Company's possible change to an AIM Rule 15 cash shell as described in Rule 15 of the AIM Rules for Companies, as foreshadowed by the Company's announcement this month about its financial and operational position. This appointment is no reflection on Brandon Hill, whose input was invaluable. Our nominated adviser, ZAI Corporate Finance Limited, shall cease nomad operations on 19 October 2017 and we are in discussions with a potential replacement nominated adviser.
FINANCING
We were significantly supported during the period by three principal funders, the Wang family, Redstone Capital Limited and Bergen Global Limited. I am very grateful to each of these funders for their crucial support for the Company. We have also been supported by a placing of new shares arranged by Brandon Hill Capital. Without their support, the Company would have been unlikely to find any alternative sources of funding and most likely therefore would have been unable to continue its existence. The Company announced earlier this month that the capital requirement it faces is inconsistent with the Company's ability to remain as a listed mining business and the Board has taken the difficult decision to implement the steps described in that announcement, to move towards disposing of the Company's mining operations and to become an AIM Rule 15 cash shell.
OPERATIONS
The Company has faced a number of challenges and has been, frankly, very unlucky indeed in relation to the serious issues which it has had to face. The period under review, and since, has been in many respects a case of one step forward and two steps back. I refer you to the financial update in the Chief Executive Officer's Report on page 12 of this Annual Report. It is not a cliché to describe the convergence of the events and circumstances as a "perfect storm", but that has been the effect.
The Company, and therefore shareholders, has had to bear the brunt of the following:
· adverse weather conditions which have materially adversely affected production operations;
· labour relations issues;
· significant operational difficulties;
· difficulties in materials processing; and
· a continued lack of co-operation from the operating subsidiary's Black Empowerment Partner, Puno.
I explain each of the above in more detail below.
On the face of it, the Company has made meaningful operational progress since the end of the financial year. Unfortunately, such progress as has been made is insufficient to justify the continued expenditure required, which the Company simply cannot afford. The Company's efforts and progress have been hampered and interrupted by the following matters:
Puno Gold Investments Proprietary Limited
Relations at the operating subsidiary, Central Rand Gold SA, with a Black Empowerment Partner, Puno Gold Investments Proprietary Limited ("Puno"), are poor. In June 2017, Puno lost a High Court case brought against it by each of the companies, Central Rand Gold SA and Central Rand Gold SA's immediate parent company, in respect of a cash call under the shareholders agreement relating to Central Rand Gold SA, which has resulted in an order for Puno to pay to Central Rand Gold SA the sum of R72 326 573.47 plus the legal costs incurred by the applicants. The Board of Central Rand Gold SA finds Puno a difficult and obstructive partner, which seems to be something of a loose term in that context. The management time and legal costs involved in having to deal with Puno are, in my view, whilst necessary to protect the interests of shareholders, largely attributable to the conduct of Puno.
Feed material
The feed material in 2016 from the tolling company was inappropriate in that the materials supplied differed from those sampled, and as a result, materials from the Mine Waste Dumps acquisition were used. This, however, was too expensive to economically extract in this fashion as the grade of the material is too low, and the requirement for additional chemicals in order to extract the gold from the material is not economical. Since year end, the majority of feed has been the Company's own material.
Open pit
The Company has commenced small scale open pit mining, in slot 4 of the Kimberley reef. Materials from those operations are being processed and the Company is also processing third party materials on a tolling basis.
iProp motion
No sooner than the Company commenced open pit operations than iProp Proprietary Limited ("iProp") lodged a motion with the court to have the settlement agreement entered into in 2009 ratified by Court order to, in effect, compel the parties to implement the terms of the settlement agreement. Following negotiations between the parties, iProp withdrew its motion and discussions between the parties continue. This process has taken a considerable amount of management attention and has required the expenditure of legal fees which the Company would obviously have preferred not to have had to incur.
In October 2017, iProp issued a claim to the Company's subsidiary, regarding the recovery of outstanding leases and rentals. The claim includes late penalty charges and interest, which have not been accrued in these consolidated financial statements. This matter is with the Company's legal advisors.
Concentrator circuit
The Company has also progressed its strategy of procuring centrifugal concentrators. These will be used to semi-process 40,000 tonnes per month of sand and slimes reclaim material, and then to metallurgically treat only a small percentage of the result, which will accordingly be richer in gold. The concentrator circuit arrived in South Africa in September 2017, after some delays, and is currently in the design phase for construction. It is anticipated that concentrator circuit will be installed and commissioned in December 2017, and will be fully operational in January 2018.
Labour dispute
11 days of post year end production has been lost due to industrial action under which the unionised workforce declared a dispute regarding the implementation of wage increases. The parties settled at the CCMA with the result that 50% of each employee's monthly salary shall be paid in the form of a "13th cheque" in December 2017. This dispute involved picketing of the site and "no work, no pay"; the additional payment agreed and the effect of the strike did not result in additional cost to the Company although the management distraction, the downtime and the additional cost has been unwelcome to say the least. I would like to thank management and the employees for reaching the agreement they did.
Suspension of trading
The Company could not guarantee that it will be able to meet its financial obligations as they fall due and as a result, the Company requested a suspension in trading in its shares on 11 May 2017. The Board is considering a number of solutions to ensure the Company meets its financial obligations. As at the date of this report, the Company's shares remain suspended, pending further developments. The Company announced this month the possibility of the disposal of its mining and exploration assets (and related debt) and to become an AIM Rule 15 cash shell. Proposals are likely to be put to shareholders shortly, which would involve a recapitalisation.
Mill downtime
The excessive rainfall in the region in the first quarter of 2017 adversely affected the running of the mills (mill 1, 2 and 3) which struggled to cope with crushing significantly cloggier and muddier feed materials than had been contemplated. This resulted in a significant reduction in processing output.
The instability of the power grid in the region, combined with the electrical storms resulting from the adverse weather, resulted in a number of power outages on site, which materially affected production in Q1 of this year. A generator has been ordered for the proposed Concentrator Circuit, in order to avoid future power outages.
Perversely, the excessive rainfall had been preceded by a drought which resulted in water use restrictions being imposed throughout Gauteng; the Company invested in a reticulation system to enable production to continue - this required additional expenditure for which the Company had not budgeted.
CONCLUSION
I would like to thank shareholders for their patience and resilience during this very difficult and unsatisfactory period for the Company. It has not showed the results I had hoped to see and has not turned out to be the Company I expected to chair.
Cash flows have been significantly lower than forecast. Accordingly, demands for finance have increased. Such finance as has been available, has inevitably been more expensive than ideally would be the case.
Please be assured the Board is committing a significant amount of time, much of which is unremunerated, to seek to deliver an outcome for shareholders which will provide what the Board considers is the best long term result for shareholders in the context of the Company's current capital base and very limited free capital. Had the Company been better capitalised, some of the difficulties could have been avoided or mitigated but funding has simply not been available to address the barrage of issues the Company has faced.
The Company's financial position has been and remains very challenging and the balance sheet is under significant strain.
We shall continue to keep shareholders informed of all material developments and matters which affect the Company. It has disclosed to the market its latest financial and operational status, with the likely outcome being a complete disposal of its mining operations, the disposal also of its debt obligations and its reclassification into an AIM Rule 15 cash shell.
I very much regret that I have been unable to deliver a positive message for you but I hope to deliver a more favourable outcome in due course.
Simon Charles
Independent Non-executive Chairman
Chief Executive Officer's report
INTRODUCTION
The Company had three key objectives during the first six months of 2016, namely:
· to repair and replace Mill No 1 that broke down in January 2016;
· to create a positive cash flow going forward; and
· to stabilise operations.
The objective for the second half of 2016 was to toll treat third party material through the Central Rand Gold SA metallurgical processing plant, as per the agreement concluded with Nikkel Mining.
KEY SALIENT FEATURES DURING 2016
· The loss before interest, tax, depreciation and impairment for the 2016 financial year amounted to US$3.1 million (2015: US$2.9 million (restated)).
· The rate of dewatering of the underground workings increased and the water table measured approximately 160 metres below surface ("mbs") in October 2016. However, the water levels increased to approximately 133 mbs at the end of 2016 as a result of heavy rains. The pumping station is being managed by Trans Caledon Tunnel Authority ("TCTA"), a government company.
· The Mill No 1 was successfully replaced by a refurbished Mill and operations were temporarily halted in order to reduce expenditure during the maintenance period.
· Excess labour issues were challenging for Central Rand Gold SA. This was resolved by embarking on a process to right-size the workforce according to the operational requirements. The process was successfully concluded, resulting in only four employees being retrenched.
SAFETY
Safety statistics
Type of injury | Year ended 31 December 2016 | Year ended 31 December 2015 |
Dressing cases | 2 | - |
Lost time injuries | 4 | 3 |
Fatalities | - | - |
Safety remains a key focus for the Company, irrespective of the environment in which it operates. The Company has embarked on a number of safety campaigns to invigorate the safety culture in the Company. The impact of the safety campaigns has resulted in 164 lost time injury free days as at 22 June 2017, which is a record for Central Rand Gold SA to date.
ACID MINE DRAINAGE ("AMD")
The High Density Sludge ("HDS") plant is owned by a government entity, TCTA, and has been operational since mid-2014. The Company continues to monitor the water level at its mining operations as well as the daily discharge pumped out of the Central Basin from the HDS plant. The Company has observed that when the flow rate is maintained at approximately 60 million litres per day ("mlpd"), which equates to approximately 80% of nameplate capacity, a reduction in the water level occurs. The water levels dropped considerably to 160 mbs in October 2016. However, once the rainy season started again during November 2016, the water increased once again, to 133 mbs in December 2016.
Central Rand Gold SA visited the plant and had discussions with the personnel operating the plant. The observation reached is that there are various areas where there is further ingress of water along the Central Basin, and therefore alternate pumping methods need to be considered in addition to the AMD plant.
Various projects are being undertaken by the Company in order to evaluate the possibility of expediting the water pumping, and of mining underground, using different mine plans and methodologies.
MINING UPDATE
Mineral Resources
In August 2016, the application for the renewal of the Mining Rights was compiled and submitted to the DMR in South Africa. Since the submission, no further correspondence has been received from the DMR, and Central Rand Gold has continued operations.
The Mineral Resources remain unchanged from the previous year, due to the cessation of underground workings. Surface operations are classified as 'Exploration Target' in terms of the SAMREC code.
The temporary cessation of underground mining in September 2014, due to the rising water levels, precipitated a dramatic shift in the mining operations. The Company started moving away from open pit mining to target the higher grade underground ore body. The shift back to surface did have a significant impact on the Company.
The below table provides the current surface areas available for mining:
Location
| Viable Strike Length (m) |
Tonnes (t) | Estimated Grade (g/t) | Average Thickness (cm) | Estimated Ounces
| Reef Package
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Slot 1 | 338 | 35,395 | 1.60 | 124 | 1,308 | Kimberley |
N1 Bypass | 1,380 | 77,764 | 1.40 | 84 | 3,496 | Bird |
Slot 6 | 450 | 85,068 | 2.17 | 113 | 5,929 | Kimberly |
Slot 5 Nasrec | 120 | 13,191 | 1.35 | 72 | 572 | Bird |
Slot 5 CW Road | 1,300 | 130,317 | 1.29 | 72 | 5,405 | Bird |
Slot 10 | 460 | 89,050 | 1.98 | 123 | 5,669 | Kimberley |
Slot 11 West | 820 | 288,302 | 1.98 | 360 | 18,311 | Bird |
Slot 11 East | 345 | 125,491 | 1.98 | 131 | 7,970 | Bird |
Slot 11 A west | 650 | 70,589 | 1.98 | 131 | 4,483 | Bird |
Slot 11 A east | 470 | 130,188 | 1.98 | 47 | 8,288 | Bird |
Slot 12 | 460 | 90,283 | 1.29 | 123 | 3,747 | Kimberley |
Slot 4 | 836 | 60,162 | 2.09 | 132 | 4,043 | Kimberley |
Slot 5 | 406 | 49,015 | 2.12 | 92 | 3,342 | Bird |
Slot 7 | 1,964 | 150,708 | 2.23 | 189 | 10,786 | Bird |
The quantity and grade described above has been derived from historical sampling data, together with current information gathered and verified by both the Mining Engineer (J Ramabaleha), and the Geologist (S Ngcobo) at Central Rand Gold.
The above table does not include surrounding sand and slimes resources which the Company has sourced and secured for the Concentrator Plant, which was purchased in 2017 and will be operational by January 2018.
Production statistics
31 December 2016 Tonnes (t) | 31 December 2015 Tonnes (t) | Variance Tonnes (t) | |
Underground | - | - | - |
Surface | 33,424 | 204,916 | (171,492) |
Reclamation | 36,892 | - | 36,892 |
Total | 70,316 | 204,916 | (134,600) |
Surface mining was largely focused at Slots 4, 5 and 7 during 2016. Pits at Slots 5 and 7 have been mined down to a depth of approximately 30 metres. The average belt grade for these pits to date is 1.94g/t. In March 2016, the pits were put onto Care and Maintenance as Mill Number 1 was structurally damaged and the Company had to source a new mill. The mining strategy was revised and commenced once again at Slot 4 in the first quarter of 2017. Focus is now on the rehabilitation of previously mined-out pits.
With over 100 years of significant mining in the Johannesburg region, there remains a significant amount of old rock and slime dumps, which surround the Company's metallurgical plant. Various owners of these dumps have approached Central Rand Gold to sell or enter into a joint venture with them for the extraction of gold from the materials.
To this extent, drilling and sampling operations have been undertaken. Where economical grades have been identified and with the consent of the resource owners, the Company has removed this material and processed it through its metallurgical plant. This activity has an added benefit of rehabilitating the surrounding area. A project was undertaken in partnership with Zhejiang Golden Machinery Plant ("ZGMP") to test a concentrator pilot plant. The material used is reclaimed slimes/sands, with below 1g/t grades. The outcome of the test work was positive and the concentrator plant was sourced from China. The concentrator plant was delivered to site in September 2017 and is currently in the design phase for construction. It is anticipated that the concentrator plant will be installed and commissioned in December 2017, and will be fully operational in January 2018. Central Rand Gold will then be able to process the reclaimed slimes/sands dump material economically.
METALLURGICAL UPDATE
Production statistics
2016 | 2015 | |
January to December | January to December | |
Internal | ||
Tonnes processed (t) | 48,938 | 183,761 |
Built up head grade (g/t) | 1.49 | 1.69 |
Fine gold produced (Oz) | 1,394 | 7,017 |
External (Toll treatment) | ||
Tonnes processed (t) | 65,979 | - |
Delivered grade (g/t) | 1.37 | - |
Fine gold produced (Oz) | 1,740 | - |
Total tonnes processed (t) | 114,917 | 183,761 |
Total gold produced (Oz) | 3,134 | 7,017 |
Internal gold production for 2016 was less than that of 2015 due to the fact that Mill Number 1 was irreparable after a breakdown and consequently, the Company had to source another mill. A second-hand mill was purchased, installed and commissioned in October 2016, with full production capacity being reached in November 2016.
All production was halted at the end of May 2016, and a total plant clean up and shut down maintenance was undertaken. Production commenced in August 2016, with the tolling of a third party's material for the remainder of the year.
FINANCIAL UPDATE
Results
The loss before interest, tax, depreciation and impairment for the period under review amounted to US$3.1 million, considerably higher than that of 2015 at US$2.9 million (restated).
Revenue realised from the sale of gold, derived from mining activities for the year pertaining to internal gold production, decreased to 3,134 ounces (2015: 7,017 ounces), which is as a direct result of halting operations in May 2016 and then commencing only with toll treatment for the remainder of the period. The gold recovered from the tolled material is not recognised as income for Central Rand Gold, and is attributed to the third party; only the tolling fee is recognised as income. Overall revenue in US Dollar terms (being from gold sales as well as toll treatment) decreased by 41% from US$8.1 million in 2015 to US$4.8 million in 2016, which is as a result of the down-time of operations.
Significant restructuring occurred within the Company to realign the business to its new focus on toll treatment, with significant job reductions, as well as changes to the management team and structure. At the end of 2015, the executive team exited from the organisation and apart from the CEO position, the vacancies were not filled. The operations were managed empowering the current personnel. The Chief Executive Officer of Central Rand Gold SA managed both the roles of Chief Financial Officer and Chief Executive Officer of the Group during 2016. This trend is positive and the key focus remains to move the organisation into sustainable cash generation as well as into a profit making position.
Cash generated from fundraising and through the subscription of new ordinary shares was used throughout the year in order to sustain the operations, and for the replacement and repairs of critical equipment. Since the suspension of the trading of shares, the operations have managed to fund their own cash flows from production.
During the financial period, the Group discovered a number of accounting errors relating to transactions and balances that had not been recorded during the year ended 31 December 2015. Please refer to note 35 of the Annual Financial Statements for details of these prior period errors.
LOOKING FORWARD
The focus over the next year is to continue to toll treat material through the plant, to mine a small open pit operation and to purchase, install and commission a concentrator plant so that the Company can diversify its risk. This diversification will enable the Company to respond to the market conditions which may negatively affect the ability of the Company to actively generate an income. Central Rand Gold SA will also focus on the rehabilitation of the mined out areas.
Various opportunities have been brought to the attention of Central Rand Gold, and project and task teams have been formed to evaluate each one, and make recommendations to the Board for possible joint ventures, mergers and/or mining opportunities. Despite none of the opportunities being deemed as viable, capital raising efforts are continuing. To that end, in September 2017 the Company appointed Peterhouse Corporate Finance Limited as its brokers, with a view to the Company undertaking a recapitalisation. Work is underway in relation to that process, in the context of the Company putting proposals to shareholders for the necessary authority to enable any such recapitalisation to occur and subsequent proposals to restructure the Company to divest itself of its mining interests and related indebtedness but retaining its listings.
Lola Trollip
Chief Executive Officer
Statement of Financial Position |
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as at 31 December 2016 |
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Group |
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Restated | Restated |
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2016 | 2015 | 2014 |
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Notes | US$'000 | US$'000 | US$'000 |
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ASSETS |
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Non-current assets |
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Plant and equipment | 1,354 | 2,146 | 3,409 |
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Intangible assets | 1,430 | 1,691 | 2,830 |
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Security deposits and guarantees | 52 | 46 | 191 |
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Environmental guarantee investment | 2,659 | 2,584 | 3,177 |
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Loans receivable | 7,706 | 6,164 | 7,513 |
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13,201 | 12,631 | 17,120 |
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Current assets |
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Security deposits and guarantees | 29 | 26 | 65 |
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Prepayments and other receivables | 361 | 444 | 1,239 |
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Inventories | 28 | 120 | 76 |
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Cash and cash equivalents | 489 | 556 | 914 |
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Derivative asset | - | - | 720 |
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907 | 1,146 | 3,014 |
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Total assets | 14,108 | 13,777 | 20,134 |
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EQUITY |
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Attributable to equity holders of the parent |
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Share capital | 9 | 28,372 | 26,617 | 26,490 |
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Share premium | 9 | 225,289 | 224,037 | 222,963 |
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Share-based compensation reserve | 28,238 | 28,238 | 28,238 |
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Treasury shares | (6) | (6) | (6) |
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Foreign currency translation reserve | (27,234) | (27,921) | (29,597) |
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Accumulated losses | (266,189) | (261,713) | (261,715) |
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(11,530) | (10,748) | (13,627) |
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Non-controlling interest | - | - | - |
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Total equity | (11,530) | (10,748) | (13,627) |
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LIABILITIES |
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Non-current liabilities |
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Environmental rehabilitation | 3,281 | 3,676 | 4,904 |
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Loan payable | 7,706 | 6,164 | 13,285 |
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10,987 | 9,840 | 18,189 |
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Current liabilities |
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Trade and other payables | 6,767 | 6,939 | 6,947 |
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Royalties taxation payable | 188 | 140 | 177 |
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Loan payable | 6 | 7,522 | 6,959 | - |
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Derivative liability | 6 | 174 | 647 | 8,448 |
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14,651 | 14,685 | 15,572 |
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Total liabilities | 25,638 | 24,525 | 33,761 |
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Total equity and liabilities | 14,108 | 13,777 | 20,134 |
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Statement of Profit or Loss and Other Comprehensive Income |
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for the year ended 31 December 2016 |
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Group |
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Restated | |||||||
2016 | 2015 | ||||||
Notes | US$'000 | US$'000 | |||||
Revenue | 4,825 | 8,093 | |||||
Production costs | (1,684) | (6,079) | |||||
Employee benefits expense | (2,071) | (2,252) | |||||
Directors' emoluments | (254) | (468) | |||||
Operating lease expense | (1,252) | (872) | |||||
Operational expenses | (443) | (469) | |||||
Other expenses | (2,388) | (1,072) | |||||
Other income and gains | 169 | 305 | |||||
Foreign exchange transaction losses | (49) | (75) | |||||
Loss before interest, tax, depreciation and impairment | (3,147) | (2,889) | |||||
Depreciation and amortisation charge | (698) | (925) | |||||
Impairment of assets | (1,380) | (1,418) | |||||
Fair value movement in embedded derivative | 6 | 1,194 | 7,081 | ||||
Finance and investment income | 1,205 | 1,149 | |||||
Finance costs | (1,650) | (2,996) | |||||
(Loss)/profit before income tax | (4,476) | 2 | |||||
Income tax expense | - | - | |||||
(Loss)/profit for the year | (4,476) | 2 | |||||
(Loss)/profit is attributable to: | |||||||
Non-controlling interest | - | - | |||||
Equity holders of the parent | (4,476) | 2 | |||||
(4,476) | 2 | ||||||
(Loss)/earnings per share for loss attributable to the equity holders during the year (expressed in US cents per share) | |||||||
Basic (loss)/earnings per share | (3.06) | - | |||||
Diluted loss per share | (3.05) | (2.79) | |||||
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Statement of Profit or Loss and Other Comprehensive Income (continued) | |||||
for the year ended 31 December 2016 | |||||
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Group | |||||
Restated | |||||
2016 | 2015 | ||||
US$'000 | US$'000 | ||||
(Loss)/profit for the year | (4,476) | 2 | |||
Other comprehensive (loss)/income: | |||||
Item that may be reclassified subsequently to profit or loss | |||||
Exchange differences on translating foreign operations | 687 | 1,676 | |||
Other comprehensive (loss)/income for the period, net of tax | 687 | 1,676 | |||
Total comprehensive (loss)/income for the period | (3,789) | 1,678 | |||
Total comprehensive (loss)/income is attributable to: | |||||
Non-controlling interest | - | - | |||
Equity holders of the parent | (3,789) | 1,678 | |||
(3,789) | 1,678 | ||||
Statement of Changes in Equity | ||||||||||||||||||||||||||||||||||||||||||||
for the year ended 31 December 2016 | ||||||||||||||||||||||||||||||||||||||||||||
Attributable to equity holders of the Group |
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Ordinary share capital | Share premium | Share-based compensation reserve | Treasury shares | Foreign currency translation reserve | Accumulated losses | Total equity |
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US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
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Balance at 1 January 2015 - previously reported | 26,490 | 222,963 | 28,238 | (6) | (29,534) | (261,559) | (13,408) |
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Adjustments - prior period errors | - | - | - | - | (63) | (156) | (219) |
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Balance at 1 January 2015 - restated | 26,490 | 222,963 | 28,238 | (6) | (29,597) | (261,715) | (13,627) |
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Total comprehensive income for the year |
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Profit for the year - restated | - | - | - | - | - | 2 | 2 |
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Other comprehensive income |
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Foreign currency adjustments | - | - | - | - | 1,676 | - | 1,676 |
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Transactions with owners, recorded directly in equity |
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Issue of shares: |
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Capital raising | 127 | 1,074 | - | - | - | - | 1,201 |
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Balance at 31 December 2015 - as restated | 26,617 | 224,037 | 28,238 | (6) | (27,921) | (261,713) | (10,748) |
| ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
Attributable to equity holders of the Group |
| |||||||||||||||||||||||||||||||||||||||||||
Ordinary share capital | Share premium | Share-based compensation reserve | Treasury shares | Foreign currency translation reserve | Accumulated losses | Total equity |
| |||||||||||||||||||||||||||||||||||||
US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
| |||||||||||||||||||||||||||||||||||||
Balance at 31 December 2015 - previously reported | 26,617 | 224,037 | 28,238 | (6) | (28,993) | (260,117) | (10,224) |
| ||||||||||||||||||||||||||||||||||||
Adjustments - prior period errors | - | - | - | - | 1,072 | (1,596) | (524) |
| ||||||||||||||||||||||||||||||||||||
Balance at 31 December 2015 - restated | 26,617 | 224,037 | 28,238 | (6) | (27,921) | (261,713) | (10,748) |
| ||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year |
| |||||||||||||||||||||||||||||||||||||||||||
Loss for the year | - | - | - | - | - | (4,476) | (4,476) |
| ||||||||||||||||||||||||||||||||||||
Other comprehensive expense |
| |||||||||||||||||||||||||||||||||||||||||||
Foreign currency adjustments | - | - | - | - | 687 | - | 687 |
| ||||||||||||||||||||||||||||||||||||
Transactions with owners, recorded directly in equity |
| |||||||||||||||||||||||||||||||||||||||||||
Issue of shares: |
| |||||||||||||||||||||||||||||||||||||||||||
Capital raising | 1,755 | 1,252 | - | - | - | - | 3,007 |
| ||||||||||||||||||||||||||||||||||||
Balance at 31 December 2016 | 28,372 | 225,289 | 28,238 | (6) | (27,234) | (266,189) | (11,530) |
| ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||
Statement of Cash Flow |
| |||||||||
for the year ended 31 December 2016 |
| |||||||||
| ||||||||||
Group |
| |||||||||
Restated | ||||||||||
2016 | 2015 | |||||||||
Notes | US$'000 | US$'000 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
| |||||||||
(Loss)/profit before tax | (4,476) | 2 |
| |||||||
Adjusted for : |
| |||||||||
Depreciation and amortisation | 698 | 925 |
| |||||||
Loss/(profit) on disposal of plant and equipment | 892 | (146) |
| |||||||
Profit on disposal of shares | (3) | - |
| |||||||
Impairment of assets | 1,380 | 1,418 |
| |||||||
Revaluation of investment | (54) | - |
| |||||||
Net loss on foreign exchange | 49 | 75 |
| |||||||
Finance income | (1,205) | (1,149) |
| |||||||
Finance costs | 1,650 | 2,996 |
| |||||||
Fair value movement in embedded derivative | 6 | (1,194) | (7,081) |
| ||||||
Changes in working capital |
| |||||||||
Decrease in prepayments and other receivables | 84 | 795 |
| |||||||
Decrease/(increase) in inventory | 92 | (44) |
| |||||||
Decrease in trade and other payables | (172) | (8) |
| |||||||
Decrease in provisions | (1,294) | - |
| |||||||
Cash flows used in operations | (3,553) | (2,217) |
| |||||||
Finance income received | 195 | 783 |
| |||||||
Net cash used in operating activities | (3,358) | (1,434) |
| |||||||
| ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
| |||||||||
Purchases of plant and equipment | (9) | (92) |
| |||||||
Proceeds from disposal of plant and equipment | - | 180 |
| |||||||
Increase in environmental guarantee deposit | - | 65 |
| |||||||
Withdrawal of capital on guarantee investment | 422 | - |
| |||||||
Net cash from investing activities | 413 | 153 |
| |||||||
| ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
| |||||||||
Proceeds from issue of shares for cash | 9 | 3,185 | 1,261 |
| ||||||
Cost relating to the issue of shares | 9 | (178) | (60) |
| ||||||
Net cash from financing activities | 3,007 | 1,201 |
| |||||||
| ||||||||||
Net decrease in cash and cash equivalents | 62 | (80) |
| |||||||
Cash and cash equivalents at 1 January | 556 | 914 |
| |||||||
Effects of exchange rate fluctuations on cash balances | (129) | (278) |
| |||||||
Cash and cash equivalents at 31 December | 489 | 556 |
| |||||||
| Notes to the Annual Financial Statements | ||||||||||||
| |||||||||||||
| 1. General information | ||||||||||||
| |||||||||||||
| Central Rand Gold Limited ("Central Rand Gold") is a Guernsey incorporated company and it is also registered in South Africa as an external company. One of its subsidiaries, Central Rand Gold (Netherland Antilles) N.V. ("CRGNV"), was incorporated in the Netherlands Antilles. Central Rand Gold's operating subsidiary is Central Rand Gold South Africa Proprietary Limited ("Central Rand Gold SA"). Central Rand Gold has a primary listing on the London Stock Exchange ("LSE") and a secondary listing on JSE Limited ("JSE"). | ||||||||||||
| |||||||||||||
| Central Rand Gold complies with the company laws of its place of incorporation being Guernsey and the company laws of the place of its external registration being South Africa. One of its subsidiaries, CRGNV, is incorporated in the Netherlands Antilles, therefore the Group is also impacted by the company laws of the Netherlands Antilles. | ||||||||||||
| |||||||||||||
| The financial information for the year ended 31 December 2016 set out in this announcement does not constitute the Company's statutory accounts. These financial statements included in the announcement have been extracted from the Group annual financial statements for the year ended 31 December 2016. The financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards adopted for use in the European Union. However, this announcement does not itself contain sufficient information to comply with IFRS. | ||||||||||||
| |||||||||||||
| The auditor has issued his opinion on the Group's financial statements for the year ended 31 December 2016 which is qualified and contains an emphasis of matter paragraph in respect of the matters referred to under note 2 'Going concern' and is available for inspection at the Company's registered address and will be posted to the Group's website. | ||||||||||||
| |||||||||||||
| The basis for the qualified opinion is presented below: | ||||||||||||
| |||||||||||||
| With respect to plant and equipment amounting to US$1.35 million at 31 December 2016, evidence available to us was limited because we were unable to carry out sufficient physical testing of items and verification into the Group's fixed asset register. Owing to the nature of the Group's accounting books and records, we were unable to obtain sufficient audit evidence regarding the valuation, existence and completeness of plant and equipment by using other audit procedures. | ||||||||||||
| |||||||||||||
| The emphasis of matter paragraph is presented below: | ||||||||||||
| |||||||||||||
| Emphasis of matter - Going concern In forming our opinion on the consolidated financial statements, we have considered the adequacy of the disclosures made in note 2 to the consolidated financial statements concerning the Group's ability to continue as a going concern. The Group incurred a net loss of US$4.48 million during the year ended 31 December 2016 and, at that date, the Group's net current liabilities amounted to US$13.6 million. These conditions, along with the other matters explained in note 2 to the consolidated financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The consolidated financial statements do not include adjustments that would result if the Group was unable to continue as a going concern. | ||||||||||||
| |||||||||||||
| 2. Basis of preparation | ||||||||||||
| |||||||||||||
| The consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards and Interpretations (collectively "IFRS") issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("EU"). However, this announcement does not itself contain sufficient information to comply with IFRS. The Company will publish full financial statements that comply with IFRS on 16 October 2017. | ||||||||||||
| |||||||||||||
| The consolidated financial statements are presented in United States Dollars ("US$" or "US Dollar") and rounded to the nearest thousand. The functional currency of the parent company is the US Dollar. The functional currency of its principal subsidiary, Central Rand Gold SA is the South African Rand ("ZAR" or "Rand"). | ||||||||||||
| |||||||||||||
| Going concern | ||||||||||||
| The Group had net current liabilities at 31 December 2016 of US$13.6 million, including US$7.7 million of loan notes (and interest), with Redstone Capital Limited and Mr Wang, and US$6.8 million of trade and other payables. The ability of the Group to continue as a going concern is dependent on the Group securing access to sufficient additional funding and extending the repayment terms of existing loan notes or the loan note holders converting the loan notes into equity, to support the Group's cash flow projections. | ||||||||||||
| |||||||||||||
| In April 2016, following the decision of the High Court of South Africa to uphold the Company's appeal with costs in relation the dispute with Puno Gold Investments Proprietary Limited ("Puno"), Puno submitted an application to wind up the Group's South African operating subsidiary. As previously announced, the Board believes this to be the latest strategy from Puno to frustrate the operations of the Company and considers the application to be without merit. The Company has engaged legal advisers to defend the action and has submitted its legal rejection of the application. The time period for Puno to file their replying affidavit lapsed on 22 June 2016. Puno's opportunity to file further affidavits has now lapsed and the Company awaits Puno's confirmation whether they intend to persist in their application. In May 2017, the Company applied for the abandonment of the liquidation application, and was successful. This resulted in the liquidation application being rendered null and void. | ||||||||||||
| |||||||||||||
| In May 2016, the Group ceased open pit mining operations and will instead temporarily focus on toll treatment operations under a binding tolling agreement with a third party which is expected to be cash flow generative. The open pit was recommenced in March 2017, and various other tolling agreements were entered into. This has created flexible income streams, and has also reduced the risk of scarcity of material for feeding the plant. | ||||||||||||
| |||||||||||||
| Since the year end, the Group has raised US$1.6 million (net) through share placements and drawn down US$0.6 million of bridge finance under a convertible loan note facility ('CLN') with Bergen Global Opportunity Fund, LP ('Bergen') for working capital purposes. Under the terms of the agreement, the Group can draw down up to US$4.0 million subject to agreement by both parties. | ||||||||||||
| |||||||||||||
| Whilst CRGSA's operations have by and large stabilised operationally in 2017, the financial and operational positions remain fragile and there is a very thin working capital position at the operating company level with a negative position within the Company, as mentioned above. The Company's production for the period January 2017 to 30 June 2017 was 2 320 Troy Ounces. The Company's overall financial position is accordingly negative and the Directors are now actively exploring urgent financing options. In order to remain a listed, operational mining group, in steady state and with a view to achieving medium term profitability, the Directors consider a cash injection of not less than US$ 20 million would be required to be made. The Directors consider that this is unlikely to be forthcoming in the near future or at all. Accordingly the Directors are actively pursuing options which would involve retaining its listings but the disposal of the Company's interests in its immediate subsidiary company, Central Rand Gold (Netherlands Antilles) BV, unless it is able to secure sufficient alternative finance at the required level in the very near future. | ||||||||||||
| |||||||||||||
| The Group's Senior Secured Loan Notes of US$7.25 million principal ('the Notes'), held by the Group's largest shareholder Redstone Capital Limited ('Redstone'), fell due for maturity in September 2016. Redstone has provided a written undertaking to extend the maturity of the Notes to at least December 2018 subject to concluding negotiations regarding revisions to the terms of conversion in the coming months. The Directors, based on discussions with representatives of Redstone, fully expect that the Notes will ultimately be converted rather than called for payment. | ||||||||||||
| |||||||||||||
| The Directors have prepared cash flow forecasts for a period of at least 12 months from the date these financial statements were approved, which show that the Group is able to meet its liabilities as they fall due. However, the cash flow forecasts are dependent upon the Group successfully concluding the sale of the operating listed entity, and, by novating the loans to the operating entities, privatising those operations. | ||||||||||||
| |||||||||||||
| The Directors have concluded that the above circumstances give rise to a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern and it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business. Nevertheless, after taking account of the Group's plans to sell off some of the assets, and having considered the risks and uncertainties associated with the forecasts, the Directors have a realistic expectation that the Group will have adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements. For these reasons, the Directors continue to prepare the financial statements on a going concern basis, and the financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate. | ||||||||||||
| |||||||||||||
3. Accounting policies |
| ||||||||||||
| |||||||||||||
| These results have been prepared on a basis that is consistent with the accounting policies applied by the Group in its audited consolidated financial statements for the year ended 31 December 2015 and which will form the basis of the 2016 annual report. | ||||||||||||
| |||||||||||||
| (a) New and amended standards adopted by the Group
| ||||||||||||
| In 2016 the Group adopted the amendments to IFRS 7 'Financial Instruments: Disclosures', IFRS 10 'Consolidated Financial Statements', IAS 1 'Presentation of Financial Statements', IAS 16 'Property, Plant and Equipment, IAS 19 'Defined Benefit Plans: Employee Contributions and IAS 38 'Intangible Assets'. These have had no significant impact on the Group's results. | ||||||||||||
| |||||||||||||
| (b) New standards, amendments and interpretations not yet adopted
| ||||||||||||
| A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. | ||||||||||||
| |||||||||||||
| The amendments to IFRS 2 'Share-based Payment', IFRS 12 'Disclosure of Interests in Other Entities', IFRS 15 'Revenue from Contracts with Customers', IAS 7 'Statement of Cash Flows' and IAS 12 'Income Taxes' are effective for accounting periods beginning on or after 1 January 2017 but with early adoption permitted. The amendments to IFRS 15 'Revenue from Contracts with Customers' is effective for accounting periods beginning on or after 1 January 2018 but with early adoption permitted. Management is still evaluating the effect of the adoption of IFRS 15 'Revenue from Contracts with Customers' to the operating results of the entity. The amendments to IFRS 16 'Leases' is effective for accounting periods beginning on or after 1 January 2019 but with early adoption permitted. The adoptions are not expected to have a significant impact upon the Group's net results, net assets or disclosures. | ||||||||||||
| |||||||||||||
| IFRS 9 'Financial Instruments' replaces IAS 39 Financial Instruments: Recognition and Measurement. The standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. It uses a single approach, based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets, to determine whether a financial asset is measured at amortised cost or at fair value. It requires a single impairment method to be used, replacing the numerous impairment methods in IAS 39 that arose from the different classification categories. It also removes the requirement to separate embedded derivatives from financial asset hosts. The standard introduces new requirements for an entity choosing to measure a liability at fair value to present the portion of the change in its fair value due to changes in the entity's own credit risk in the other comprehensive income section of the statement of comprehensive income, rather than within profit or loss. This new standard may impact the classification and measurement of financial assets and the Group is in the process of assessing the impact. The standard is effective for year ends beginning on or after 1 January 2018. | ||||||||||||
| |||||||||||||
4. Directorate |
| ||||||||||||
| |||||||||||||
During the financial period under review, the composition of the Board of Directors was as follows: |
| ||||||||||||
| |||||||||||||
|
| ||||||||||||
| |||||||||||||
| 1 Mr Allen Phillips resigned from the Board and its committees on 6 June 2016. | ||||||||||||
| |||||||||||||
| 5. Segment reporting | ||||||||||||
| |||||||||||||
| An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The entity's chief operating decision maker reviews information in one operating segment, being the acquisition of mineral rights and data gathering in the Central Rand Goldfield of South Africa, therefore management has determined that there is only one reportable segment. Accordingly, no analysis of segment revenue, results or net assets has been presented. No corporate or other assets are excluded from this segment. | ||||||||||||
| ||||||||
6. Loans payable - Redstone Capital Limited |
| |||||||
| ||||||||
Debt | Warrant | Redstone's debt conversion option | Central Rand Gold's debt conversion option | Total |
| |||
US$ '000 | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
| |||
At 1 January 2015 | 5,772 | 2,383 | 6,065 | (720) | 13,500 |
| ||
Fair value (gain)/loss | - | (1,905) | (5,896) | 720 | (7,081) |
| ||
Interest | 1,767 | - | - | - | 1,767 |
| ||
Cash paid | (580) | - | - | - | (580) |
| ||
At 31 December 2015 | 6,959 | 478 | 169 | - | 7,606 |
| ||
Fair value (gain)/loss | (618) | - | 5 | - | (613) |
| ||
Derivative lapsed | - | (478) | - | - | (478) |
| ||
Interest | 582 | - | - | - | 582 |
| ||
At 31 December 2016 | 6,923 | - | 174 | - | 7,097 |
| ||
| ||||||||
7. Related party transactions |
| |||||||
| ||||||||
On 19 August 2013, shareholders of the Company approved the issue to Redstone, of US$7.25 million convertible loan note instruments bearing 8% p.a. coupon interest payable on a quarterly basis and repayable on 19 August 2016. The repayment terms were amended and extended to 31 December 2018. In addition to this, the Company entered into an agreement to issue to Redstone warrants equivalent to 50% of the Convertible Loan Note and an Option Agreement that, in the event that the Company undertook an open offer, Redstone will have an option to subscribe for such additional number of Ordinary Shares to ensure that its percentage holding of the issued share capital of the Company would remain unchanged (assuming the full conversion of the Loan Notes) following any such open offer. All warrants lapsed on 19 August 2016. |
| |||||||
| ||||||||
8. Share-based payments |
| |||||||
| ||||||||
During the year, no further share options were granted to employees. |
| |||||||
| ||||||||
9. Share capital and share premium | ||||||
| ||||||
| Number of shares | Issued and fully paid up shares | Share premium | Total |
| |
| US$ '000 | US$ '000 | US$ '000 |
| ||
| At 1 January 2015 | 87,180,808 | 26,490 | 222,963 | 249,453 |
|
| Issue of shares for cash | 8,015,000 | 127 | 1,134 | 1,261 |
|
| Cost of share issue | - | - | (60) | (60) |
|
| At 31 December 2015 | 95,195,808 | 26,617 | 224,037 | 250,654 |
|
| Issue of shares for cash | 43,811,340 | 627 | 1,430 | 2,057 |
|
| Shares issued in respect of convertible securities | 68,743,550 | 1,128 | - | 1,128 |
|
| Cost of share issue | - | - | (178) | (178) |
|
| At 31 December 2016 | 207,750,698 | 28,372 | 225,289 | 253,661 |
|
On 5 February 2016, the Company issued 14,279,371 new Ordinary Shares of £0.01 each at a price of 3.5 pence per Ordinary Share, which raised gross proceeds of approximately US$0.72 million (£0.50 million). | ||||||
On 7 March 2016, the Company issued 20,719,644 new Ordinary Shares of £0.01 each at a price of 3.5 pence per Ordinary Share, which raised gross proceeds of approximately US$1.05 million (£0.72 million). | ||||||
On 7 June 2016, the Company issued 4,620,005 new Ordinary Shares of £0.01 each at a price of 3.0 pence per Ordinary Share, which raised gross proceeds of approximately US$0.2 million (£0.14 million). | ||||||
On 7 June 2016, the Company entered into a convertible securities issuance deed ("Bergen Funding Agreement") with Bergen Global Opportunity Fund, LP ("Bergen"), an institutional investment fund managed by Bergen Asset Management, LLC, a New York asset management firm, in connection with an issuance by the Company of zero coupon convertible securities (the "Convertible Securities"). The Convertible Securities were (subject to the satisfaction of certain customary conditions) issued in tranches and as at 31 December 2016 the Convertible Securities were fully converted into 72,935,870 new Ordinary Shares. | ||||||
On 21 July 2016, the Company issued 4,192,320 new Ordinary Shares of £0.01 each at a price of 1.3 pence per Ordinary Share, which raised gross proceeds of approximately US$0.09 million (£0.05 million). | ||||||
10. Dividends | ||||||
No dividends were declared or paid during the year under review. | ||||||
| ||||||||||||||||
11. Reconciliation between (loss)/earnings and headline (loss)/earnings attributable to equity holders of the Group |
| |||||||||||||||
| ||||||||||||||||
Headline (loss)/earnings are specific disclosures defined and required by the Johannesburg Stock Exchange and are non-GAAP financial measures. |
| |||||||||||||||
| ||||||||||||||||
Group |
| |||||||||||||||
2016 | 2015 |
| ||||||||||||||
US$'000 | US$'000 |
| ||||||||||||||
(Loss)/profit attributable to equity holders of the Group | (4,476) | 2 |
| |||||||||||||
Add: Loss on disposal of plant and equipment | 892 | - |
| |||||||||||||
Less: Profit on disposal of plant and equipment | - | (146) |
| |||||||||||||
Headline (loss)/earnings | (3,584) | (144) |
| |||||||||||||
| ||||||||||||||||
12. Contingent liability |
| |||||||||||||||
| ||||||||||||||||
Thin capitalisation |
| |||||||||||||||
The tax legislation with regards to thin capitalisation changed with effect from 1 April 2012 and is applicable in respect of years of assessment commencing on or after that date. The safe harbour ratio of 3:1 included in the previous legislation was replaced with the concept of "arm's length." In instances where the loans are considered not to be on an arm's length basis all or part of the interest charged could be disallowed as a deduction. Any interest not allowed as a deduction will be treated as an adjustment in terms of Section 31 of the Income Tax Act. In terms of Section 31(3) of the Income Tax Act, any adjusted amount for transfer pricing and thin capitalisation purposes, prior to 1 January 2015, constituted a deemed loan. As per the amended law, should this amount, plus interest deemed to have accrued on it, not have been repaid to the taxpayer by the relevant non-resident connected person by 31 December 2014, the outstanding "deemed loan" must "be deemed to be a dividend consisting of a distribution of an asset in specie, that was declared and paid by that resident to that other person on 1 January 2015". Such deemed dividend will be subject to Dividends Withholding Tax ("DWT"), at a rate of 15%. |
| |||||||||||||||
| ||||||||||||||||
In prior years, management obtained a legal opinion, based on which they concluded that there is no deemed loan. In further assessing the impact of the amendments on its intercompany loans, management concluded that due to the lack in industry guidance pertaining to the application of the "arm's length" concept, management will be unable to confirm their conclusion without finalising a full Transfer Pricing benchmarking study applying OECD (Organisation for Economic Co-operation and Development) principles. |
| |||||||||||||||
| ||||||||||||||||
Open tax years |
| |||||||||||||||
Central Rand Gold SA has entered into an Alternative Dispute Resolution with the South African Revenue Service relating to income tax returns submitted for the years of assessments 2010 to 2012. |
| |||||||||||||||
| ||||||||||||||||
iProp claim |
| |||||||||||||||
iProp, the landowner of various mining sites, has lodged a claim for outstanding rentals and leases. The amounts claimed are currently being reconciled, in order to quantify the position. |
| |||||||||||||||
| ||||||||||||||||
13. Events occurring after reporting date |
| |||||||||||||||
| ||||||||||||||||
Operating |
| |||||||||||||||
Feed material |
| |||||||||||||||
The feed material provided by the tolling company was inappropriate in that the materials supplied differed from those sampled and as a result materials from the Mine Waste Dumps acquisition was used. This, however, was too expensive to economically extract in this fashion as the grade of the material was too low, and the requirement for additional chemicals in order to extract the gold from the material was not economical. Since the year end, the majority of feed has been the Company's own material. |
| |||||||||||||||
| ||||||||||||||||
Open pit |
| |||||||||||||||
The Company has commenced small scale open pit mining, in slot 4 of the Kimberley reef. Materials from those operations are being processed and the Company is also processing third party materials on a tolling basis. |
| |||||||||||||||
| ||||||||||||||||
Concentrator circuit |
| |||||||||||||||
The Company has progressed its strategy of procuring centrifugal concentrators. These will be used to semi-process 40,000 tonnes per month of sand and slimes reclaim material, and then to metallurgically treat only a small percentage of the result, which will accordingly be richer in gold. |
| |||||||||||||||
| ||||||||||||||||
Labour dispute |
| |||||||||||||||
11 days of post year end, production was lost due to industrial action under which the unionised workforce declared a dispute regarding the implementation of wage increases. The parties settled at the CCMA with the result that 50% of each employee's monthly salary shall be paid in the form of a "13th cheque" in December 2017. |
| |||||||||||||||
| ||||||||||||||||
Suspension of trading |
| |||||||||||||||
The Company cannot guarantee that it will be able to meet its financial obligations as they fall due and as a result, the Company requested a suspension in trading in its shares on 11 May 2017. The Board is considering a number of solutions to ensure the Company meets its financial obligations. As at the date of this report, the Company's shares remain suspended, pending further developments |
| |||||||||||||||
| ||||||||||||||||
Mill downtime |
| |||||||||||||||
The drought experienced resulted in water use restrictions being imposed throughout Gauteng. The Company invested in a reticulation system to enable production to continue, which required additional expenditure for which the Company had not budgeted. |
| |||||||||||||||
| ||||||||||||||||
The excessive rainfall in the region adversely affected the running of the mills and both mill 1 and mill 2 struggled to cope with crushing significantly cloggier and muddier feed materials than had been contemplated. This resulted in a reduction in processing capacity. |
| |||||||||||||||
| ||||||||||||||||
The instability of the power grid in the region, and the adverse weather which resulted in electrical storms, together resulted in a number of power outages on site which materially affected production in the first quarter of 2017. |
| |||||||||||||||
| ||||||||||||||||
Fundraising |
| |||||||||||||||
In order to strengthen its working capital and to procure, ship, install and commission the Concentrator Circuit, the Company has subsequent to year-end completed the following fundraising: |
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· A new loan agreement ("the Loan Agreement") entered into on 9 January 2017 with Mr Jia Bang Wang ("Mr Wang") for funding in the amount of US$1 million ("Loan"). The loan bears interest at the UK prime lending rate plus 2% per annum and is repayable within six months from the date of entering into the Loan Agreement. In the circumstance where the Company would not be able to repay the Loan, the Loan Agreement stipulates that the Company is to inform Mr Wang of such circumstances. To date, the full value of the Loan had been received by the Company. The Loan became repayable on 9 July 2017 but the Company was not in a position to repay the Loan at that stage and accordingly informed Mr Wang as such. |
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· A share placement on 23 March 2017 of 60,000,000 new ordinary shares at 0.5 pence, which raised £0.30 million. |
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· A bridge funding (the "Bridge Funding") through a combined convertible securities with Bergen. The Bridge Funding raised US$240,000. The Convertible Securities were (subject to the satisfaction of certain customary conditions) issued in tranches and were fully converted into 26,946,257 new ordinary shares by 2 May 2017. |
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Financing |
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The Directors have been actively exploring urgent financing options. In order to remain a listed, operational mining group, in steady state and with a view to achieving medium-term profitability, the Directors consider that a cash injection of not less than US$ 20 million would be required. The Directors consider that this is very unlikely to be forthcoming in the near future or at all. Accordingly, the Directors have been actively pursuing options which would involve retaining its listings but would require the disposal of the Company's interests in its immediate subsidiary company, Central Rand Gold (Netherlands Antilles) NV, unless it is able to secure sufficient alternative finance at the required level in the very near future. |
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Puno dispute |
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On 13 June 2017, the High Court of South Africa, (Gauteng Division, Pretoria) ("the Court") handed down judgement under case number: 45200/2011, being the matter initiated by the Company, CRGNV and CRGSA against Puno on 25 November 2011. The judgement delivered was in favour of the Company, CRGNV and CRGSA. The Court upheld the views of these entities and rejected the defences proffered by Puno. This judgement has now definitively and positively pronounced on the validity and enforceability of the funding call, and found that such funding call was made in accordance with the overarching law and the Shareholders Agreement. |
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iProp claim |
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In October 2017, iProp issued a claim to the Company's subsidiary, regarding the recovery of outstanding leases and rentals. The claim includes late penalty charges and interest, which have not been accrued in these consolidated financial statements. This matter is with the Company's legal advisors. |
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Recapitalisation of the Company |
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In September 2017, the Company appointed Peterhouse Corporate Finance Limited as its brokers, with a view to the Company undertaking a recapitalisation. Work is underway in relation to that process at the time of approval of these consolidated financial statements, in the context of the Company putting proposals to shareholders for the necessary authority to enable any such recapitalisation to occur and subsequent proposals to restructure the Company, to divest itself of its mining interests and related indebtedness but retaining its listings. |
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Other |
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Subsequent to the appointment of Brandon Hill Capital Limited ("Brandon Hill") as the Company's broker on 23 January 2017, Central Rand Gold issued 936,330 ordinary shares in the Company as part consideration of their fee, in accordance with the terms of their engagement letter. |
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On 8 May 2017, the Company issued 4,200,000 ordinary shares to a creditor in lieu of a fee due by the Company. |
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14. Correction of prior period errors |
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During the financial period, the Group discovered a number of accounting errors relating to transactions and balances that had not been recorded during the years ended 31 December 2014 and 31 December 2015. Details are as follows: |
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1. An item of plant and equipment, being the dosing tank, that was sold in 2014 was not recorded as such. As a consequence, plant and equipment has been overstated by US$464,243 and the loss on the disposal of the asset has been understated by US$496,556 during the year ended 31 December 2014. As a results of the above, plant and equipment has been overstated by US$334,725 and the depreciation and amortisation charge has been overstated by US$14,743 during the year ended 31 December 2015. |
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2. Interest on the Puno loan payable was incorrectly calculated at prime plus 2% instead of at the prime rate. As a consequence, the Puno loan balance at 31 December 2014 has been overstated by US$1,132,960 and the related interest expense has been overstated by US$1,211,820. As a result of the above, the loan payable has been overstated by US$1,071,656 and the related interest expense has been overstated by US$70,245 during the year ended 31 December 2015. |
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3. Intangible assets, relating to the water pumps previously donated to the Government, had not been amortised during the year ended 31 December 2015 in accordance with IFRS and the Group's accounting policies. As a consequence, intangible assets have been overstated by US$422,889 and the related amortisation expense has been understated by US$514,822. |
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4. Certain items of plant and equipment, being the cone crusher, jaw crusher and electrical house, were not capitalised during the 2014 year of assessment. As a consequence, plant and equipment has been understated by US$281,238, production costs have been overstated by US$320,424, depreciation has been understated by US$19,610, trade and other payables have been understated by US$35,770 and the taxation expense has been understated by US$38,259 during the year ended 31 December 2014. As a result of the above, plant and equipment has been understated by US$210,113 and trade and other payables have been understated by US$26,723 during the year ended 31 December 2015. |
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5. The auditor's fees accrual during the 2015 financial year was overstated in comparison with the actual fee incurred. As a consequence, trade and other payables have been overstated by US$57,701 and other expenses have been overstated by US$70,245 during the year ended 31 December 2015. |
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6. A prepayment in respect of insurance has been overstated as the related expense was supposed to be fully recognised in 2015. As a consequence, prepayments and other receivables have been overstated by US$36,054 and other expenses have been understated by US$43,891 during the year ended 31 December 2015. |
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7. An outstanding debt payable past its collectable date and that has been carried forward from previous financial periods was written off. As a consequence, trade and other payables have been overstated by US$29,499 and the operational expense has been overstated by US$35,911 during the year ended 31 December 2015. |
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8. Based on the current circumstances with Puno, the net difference between the Puno loan receivable and Puno loan payable should be provided for. As a consequence, the Puno loan receivable was overstated and the impairment expense was understated as at 31 December 2014 and 31 December 2015 by US$1,133,000 and US$1,071,653 respectively. |
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1. Consolidated Statement of Financial Position |
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Impact of correction of errors |
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Previously stated | Adjustments | Restated |
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US$'000 | US$'000 | US$'000 |
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1 January 2015 |
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Non-current assets | 18,436 | (1,316) | 17,120 |
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Current assets | 3,014 | - | 3,014 |
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Total Assets | 21,450 | (1,316) | 20,134 |
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Non-current liabilities | 19,322 | (1,133) | 18,189 |
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Current liabilities | 15,536 | 36 | 15,572 |
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Total Liabilities | 34,858 | (1,097) | 33,761 |
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Total Equity | (13,408) | (219) | (13,627) |
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31 December 2015 |
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Non-current assets | 14,251 | (1,620) | 12,631 |
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Current assets | 1,182 | (36) | 1,146 |
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Total Assets | 15,433 | (1,656) | 13,777 |
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Non-current liabilities | 10,912 | (1,072) | 9,840 |
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Current liabilities | 14,745 | (60) | 14,685 |
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Total Liabilities | 25,657 | (1,132) | 24,525 |
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Total Equity | (10,224) | (524) | (10,748) |
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2. Consolidated Statement of Profit or Loss and Other Comprehensive Income |
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Impact of correction of errors |
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Previously stated | Adjustments | Restated |
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US$'000 | US$'000 | US$'000 |
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31 December 2015 |
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Profit | 1,442 | (1,440) | 2 |
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Item that may be reclassified subsequently to profit and loss |
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Exchange differences on translating foreign operations | 541 | 1,135 | 1,676 |
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Total comprehensive income | 1,983 | (305) | 1,678 |
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3. Consolidated Statement of Cash Flow |
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Impact of correction of errors |
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Previously stated | Adjustments | Restated |
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US$'000 | US$'000 | US$'000 |
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31 December 2015 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net cash used in operating activities | (1,421) | (13) | (1,434) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Net cash from investing activities | 153 | - | 153 |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Net cash from financing activities | 1,201 | - | 1,201 |
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Net decrease in cash and cash equivalents | (67) | (13) | (80) |
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Cash and cash equivalents at 1 January | 914 | - | 914 |
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Effects of exchange rate fluctuations on cash balances | (291) | 13 | (278) |
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Cash and cash equivalents at 31 December | 556 | - | 556 |
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Issued on behalf of: Central Rand Gold Limited |
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Date: 16 October 2017 |
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Related Shares:
Central Rand Gold