Interim Management Statement

17th Nov 2009 07:00



Immediate Release

17 November 2009

Central Rand Gold Limited ('CRG' or 'the Company')

(Incorporated as a company with limited liability under the laws of Guernsey, Company Number 45108)

(Incorporated as an external company with limited liability under the laws of South Africa, registration number 2007/0192231/10)

ISIN: GG00B24HM601

Share code on LSE: CRND

Share code on JSE: CRD

Interim Management Statement

Highlights

Decline metre advancement surpasses expectations. 

Main Reef intersected via decline development.

First stoping area opened for trial mining. 

Gold potential exposed in middling material as evidenced in surface mining.

Metallurgical processing of oxide material has been a challenge, but positive progress is now being made.

Puno "urgent interdict" to stop operations dismissed with costs.

Johan du Toit, Chief Executive Officer of CRG, commented:

"CRG is making steady progress on a number of fronts, from the pouring of gold on site, improving recoveries from the metallurgical process, through to ramping up the underground development in advance of commercial production early next year. It has been a hard journey to get to where we are today, yet we are confident we have the business plan and the team to take CRG onto its next phase of development."

For further information, please contact:

Central Rand Gold +27 (0) 11 551 4000

Johan du Toit / Patrick Malaza

Evolution Securities Limited +44 (0) 20 7071 4300

Simon Edwards / Chris Sim / Neil Elliot

Macquarie First South Advisers (Pty) Ltd +27 (0) 11 583 2000 

Thembeka Mgoduso / Annerie Britz / Melanie de  Nysschen / Manisha Ramlakhan

Buchanan Communications +44 (0) 20 7466 5000

Bobby Morse / Ben Willey / Katharine Sutton

Jenni Newman Public Relations (Pty) Ltd +27 (0) 11 506 7300

Jenni Newman / Megann Outram

Operational update

On 25 August 2009, the Board of Directors issued the following short to mid-term operational targets as part of the June 2009 interim results:

Complete the trial mining operation.

Prove that Snowden Report assumptions are robust and conservative in practice.

Demonstrate material production upside to the "base case".

Confirm the potential for significant improvements in metallurgical recoveries. 

Utilise the knowledge gained from trial mining to identify and develop additional mining targets. 

Prove CRG can mine assets profitably.

We set out below a progress update on our 6-Point Plan.

1. Complete the trial mining operation

The objective of the trial mining operation is to physically validate the main mining and metallurgical methodology as described in Snowden's reserve conversion document issued August 2009. The results of the trial mining will be used to determine the future growth strategy of the Company. 

Mining 

Surface mining 

Surface trial mining has now largely been completed at our current mining site. Both the Main Reef and the Main Reef Leader high grade reef zone were mined at an average strip ratio of 1:9 for an estimated total of 40,000t @ 4.4g/t Au for the quarter. Other surface target areas have been identified in our current mining right area but their commercial viability will only be assessed once underground trial mining has been completed.

Underground Mining

As at the end of October 2009, the decline was an estimated 66m below surface at a lateral distance of 474m from the portal. The development rate has significantly improved since the introduction of Australian Contract Mining ("ACM") who are now averaging an outstanding 52m per week compared to a rate of 20m per week prior to their commencement. 

Ground conditions have improved significantly after mining through the transition zone separating the shallow oxide and deeper sulphide zones. The initially proposed trial blocks near-to-surface were abandoned due to poor ground conditions. Several of the diamond drill holes identified unexpected voids on the Main Reef where existing mine plans and data indicated solid insitu blocks of ground. A comprehensive drilling programme is underway to systematically drill out targeted mining blocks to ensure that planned future blocks are free of unexpected mining voids. Drill results are appended at the end of this report.

The latest cross cut accessed the old Level 5 where the Main Reef Leader was mined out in the 1960s. The mine has now been divided into two sectors; east and west. Two stoping blocks have been identified for trial mining, a 58m stoping block on the west which has been exposed and a potential 80m stoping block on the east. Trial stoping remains on schedule to begin in late December 2009. 

Ore sorting

In the Snowden Resource to Reserve Study it was assumed that the development ore would be upgraded using conventional South African hand sorting. Recent tests have been undertaken using optical sorter technology as applied with success at the nearby Kloof Gold Mine. An 8kg sample of Main Reef and internal quartzite (waste) was tested at the certified Mintek Laboratory in Johannesburg with excellent separation results i.e. 90 per cent success in waste/ore separation. Encouraged by the preliminary findings, a 30t bulk sample will be processed through Mintek's ore sorting pilot plant with results expected in December 2009. Success in using this method has the potential to significantly increase production and capture the majority of sweepings and vampings (old gold) left behind.

Metallurgical Update

Metallurgical equipment consists of crushing and concentrating ("concentrating") and Carbon-In-Leach ("CIL") plants.

The new Gekko 50tph concentrating plant was delivered to site on 16 October 2009. The plant has been assembled and commissioning will begin once there is a need for additional capacity from the underground ore anticipated in 2010.

The Bateman 30tph concentrating plant ("Bateman plant") has operated above design tonnage for sustained periods, however, overall availability, less than 18 hrs per day, has been compromised by sensitivity to fluctuating feed and consequent reliability of the vertical shaft impactor ("VSI"). A small investment to reliably control and maintain the feed tonnage rates is being engineered for implementation in early 2010. 

The Bateman plant has achieved in excess of 70 per cent recovery on difficult oxide material and this is a positive indicator of performance for when the plant will process true sulphide underground ore from which the recovery should be significantly higher. 

During the current proof of concept phase and until production begins in earnest, the Company has decided to suspend concentrating with the operationally intensive Gekko 20tph plant. The Gekko 20tph plant has served its intended purpose as a pilot plant for metallurgical testing as well as to provide insight into the final design of the Gekko 50tph concentrating plant. 

Up to the end of September 2009, mainly oxide material has been treated by the concentrating and CIL plants. The CIL plant was commissioned at the end of June 2009 and started operating on a 24/7 basis in late September 2009. The CIL plant processed approximately 7,500t at an estimated grade of 9g/t for the quarter with gold production of only 193oz. In early October 2009, the Company engaged Mr PG Hurter an experienced metallurgist with over 20 years' experience with mining companies in South Africa and Australia, to lead a review of CRG's current metallurgical processes and address the low recovery rate. Findings from his investigation are as follows:

Initial review indicates that there are no fundamental flaws with the metallurgical plants.  Carbonaceous material including fly ash from ash dumps now identified over the surface mining slots, has contaminated the oxide material processed to date and blocked gold recoveries. A 0.1 per cent carbon content in the feed has been tested to result in an increased tailing of >1g/t. This is technically termed "Preg Robbing" and has been mitigated now by the addition of a carbon blocker. CIL tails are now consistently between 0.25 g/t and 0.6 g/t indicating a recovery in excess of 90 per cent. This unexpected "Preg Robbing" is limited to the surface oxide material and will not be a factor with the underground sulphides to be exclusively mined in 2010. Previous start up concentrator tails carrying grade up to 2g/t will be recovered and processed directly into the CIL - approximately 40,000t with expected recovery of 1,800oz.

In addition the following improvements to the metallurgical process have been identified and are being implemented:

Sampling techniques and methodology, and metal accounting procedures, to better understand and manage gold recovery. 

CRG estimated stockpiles and grades as at end September 2009:-

Run of Mine oxidised surface material of 14,000t at 3.9g/t.

Run of Mine underground development sulphide ore of 2,000t at 5.8g/t. 

Concentrate of 7,700t at 6 g/t still to be processed through the CIL.

2. Prove that Snowden Report assumptions are robust and conservative in practice

Update on key assumptions in Snowden report

	Assumption included in Snowden's report	Progress to date
Gold price	US$900	US$1129
Exchange rate	ZAR8.00	ZAR7.47
Met recovery	80 per cent	Will be tested once underground ore is available from stoping, which is expected in early 2010. 70 per cent recovery results on difficult oxide material treated to date give the Board confidence that recovery in excess of 80 per cent is achievable.
Average head grade	4.2g/t	Reef driving underway (expect representative results in December 2009). The Snowden report assumed no grade would occur within the middling, resulting in a mining dilution factor of 30 per cent. Some areas of the quartzite separating the Main Reef from the Main Reef Leader in mined slots contained gold grades (0.8 g/t to 3.7 g/t) over its width, which, if encountered in the underground mining operations will have important positive implications during the upcoming trial mining.
Sweepings and vampings	NIL	Sweepings and vampings have been identified in the trial mining area, but it is too early to quantify these materials.
Cash cost (operating cost)	US$580/oz	Still too early to validate any changes in assumptions.
Capital costs	US$220/oz	Too early to confirm, however, waste development is in line with Snowden Report. Decline development is estimated at US$1,137/m; CRG currently achieving US$1,166/m. Excluding labour and equipment costs.

3. Demonstrate material production upside to the "base case"

No definitive update for this objective until trial mining is completed.

4. Confirm the potential for significant improvements in metallurgical recoveries 

Trial processing of underground sulphide ore will commence in early 2010. 

5. Utilise the knowledge gained from trial mining to identify and develop additional mining targets 

The Dr Lemmer model is currently being reviewed to identify the next potential mining areas. 

6. Prove CRG can mine assets profitably

Trial mining in progress to date has not identified any significant variations to the original Snowden assumptions that would negatively impact the future profitability of the Company.

Other pertinent Company matters

Cash Position

As at the end of September 2009, the Company had approximately US$22.87m on hand.

The breakdown of the cash spends can be analysed as follows:

Cash reconciliation	Value US$ million
Balance as at 30 June 2009	46.40
Capital expenditure	-9.90
Operational and administrative expenditure	-12.84
Working capital	-1.60
Foreign exchange gain	0.40
Interest	0.22
Gold sales	0.19
Balance as at 30 September 2009	22.87

The cash balance at 30 October 2009 is US$19.3m. CRG is not expecting to incur any significant capital expenditure during the last quarter of 2009. Gold revenue is lower than anticipated but is expected to increase over the next quarter. CRG is currently pursuing various funding options for essential mining equipment as well as for the water pump station that will be required over the next few months. CRG expects to conclude these discussions by mid December 2009. The success of these negotiations will determine the timing and quantum of the next equity fundraising

Black Economic Empowerment

The arbitration procedure is continuing with Puno Gold Investments (Pty) Limited ("Puno"). It is expected that the arbitration proceedings will be completed within 2010.

In a separate matter, Puno brought an urgent interdict against Central Rand Gold South Africa (Pty) Limited; CRG's operating company, to stop the Company from progressing on what Puno refers to as full scale mining. The court case was held on 5 November 2009 at the South Gauteng High Court. We are pleased to report that the "urgent interdict" sought by Puno to halt the Company's trial mining operations was dismissed. In addition, Puno is required to pay all legal costs associated with this dispute.

Appendix 1- Drill Results

Diamond drilling has continued during the reporting period, although the focus of the drilling has been to target areas of unmined Main Reef and delineate areas where mining voids occur. Previously unreported drilling results from the CMR area are tabulated below: 

Borehole Name	X 29	Y 29	From	To	Grade (g/t)	CW (corr) (cm)	Comment
DDCMR_03_04	-2898823	-106518	64.85	65.95	4.52	110	Cavity on Main Reef Leader Evaluation
DDCMR_07_04	-2898898	-106443	78.46	81.48	2.76	302	Cavity on Main Reef Leader Evaluation
DDCMR_55_00	-2899236	-105360	140	Dyke			Terminated in Dyke
DDCMR_80005	-2899095	-105930	35.67	38.3	7.44	208	Single Reef / Value Zone
DDCMR_80006	-2899098	-105951	46.73	49.2	1.9	195	Incomplete Core at Main Reef Elevation / Single Value Zone
DDCMR_80007	-2899079	-106018	19	Aband			Hole Abandoned
DDCMR_80008	-2899099	-106034	68.68	69.95			Cavity at Main Reef and Main Reef Leader Elevation
DDCMR_80009	-2899093	-106031	67.31	69.81	8.04	198	Cavity on Main Reef Leader Elevation
DDCMR_80010	-2899084	-106025	61.81	62.49			Cavity at Main Reef and Main Reef Leader Elevation
DDCMR_80011	-2899095	-106056	76.43	76.95			Cavity at Main Reef and Main Reef Leader Elevation
DDCMR_90001	-2898777	-106635	80.1	80.91			Single reef / Value Zone Cavity
DDCMR_90002	-2898826	-106583	104.76	106.34			Single reef / Value Zone Cavity
DDCMR_90003	-2898716	-106691	66.04	67.45			Cavity at Main reef and Main Reef Elevation
DDCMR_90003b	-2898716	-106691	74.71	75.2	8.67	39	Cavity on Main Reef Leader Elevation
DDCMR_90004	-2898708	-106757	83.88	84.67	0.74	79	Cavity on Main Reef Leader Elevation
DDCMR_90004b	-2898708	-106757	94.86	97.57			Single reef / Value Zone Cavity
DDCMR_90005	-2898637	-1066859	89.55	89.68			Cavity at Main Reef and Main Reef Leader Elevation
DDCMR_90005b	-2898637	-106859	101.96	104.05			Single Reef / Value Zone Cavity
DDCMR_90006	-2898627	-106906	81.21	82.95	8.42	174	Single Reef / Value Zone
DDCMR_90006b	-2898627	-106906	79.18	80.45			Single Reef / Value Zone Cavity
DDCMR_90007	-2898605	-106967	85.3	87.06	5.81	176	Single Reef / Value Zone
DDCMR_90007b	-2898605	-106967	104.51	106.17			Single Reef / Value Zone Cavity
DDCMR_90008	-2898559	-107014	80.41	82.02			Cavity at Main Reef and Main Reef Elevation
DDCMR_90008b	-2898559	-107014	96.57	98.21	1.87	130	Single Reef / Value Zone

ENDIMSGUGWWGUPBPUQ

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