28th Sep 2007 15:48
Central African Gold PLC28 September 2007 Central African Gold Plc / Ticker: CAN / Market: AIM / Sub-sector: Gold Mining 28 September 2007 Central African Gold Plc ("CAG" or "the Company") Interim Results Central African Gold Plc, the AIM traded gold mining and exploration company,announces its interim results for the six months ended 30 June 2007. Overview • Production build-up at flagship Bibiani gold mine in Ghana has been initiated • Increased total global mineral resource estimate by 300% at Bibiani - confirms belief that the Main Zone orebody sustains a multi-million ounce deposit • Increased Ore Reserve estimate at Bibiani circa fourfold to 1.05 million oz Au • Production at Bibiani for year ending 31 December 2007 expected to be circa 40,000 oz Au - aim to increase this to an annualised rate of 100,000 oz Au by the end of 2008 • Evaluating feasibility of increasing Bibiani output to 150,000+ oz Au pa in the medium term • Continued exploration work at permits in western and southern Mali with promising results • Broadened geographical reach via an acquisition of gold mine assets in Zimbabwe Chairman's Statement It gives me great pleasure to report on the Company's progress towardsfulfilling its objective of becoming a leading mid-tier gold producer with aworld class portfolio of exploration and production assets. This has been avery active period where we have advanced the development of our flagshipproject, the Bibiani gold mine ("Bibiani") in Ghana: increased both the totalglobal mineral resource estimate by 300% and our Ore Reserve estimate by 391%;continued exploration work at our permits in western and southern Mali withpromising result, broadened our geographical focus via an acquisition of goldmine assets in Zimbabwe and strengthened the management team. As a result, Ibelieve we have the foundations in place to continue increasing both ourresource and reserve base and production levels at Bibiani to an initialannualised rate of 100,000 oz Au by the end of 2008 and to 150,000+ oz Au pa inthe medium term. Bibiani - Ghana Our primary focus has been to develop and progress our operations at the Bibianigold mine in Ghana. Since CAG took over management of Bibiani in December 2006,a Reverse Circulation ('RC') and Diamond Core Drilling ('DD') programme hasprogressed, testing extensions to the Main Zone of the Bibiani orebody andsatellite oxide pits. In July this year we announced a threefold increase inour underground resource estimate for the Bibiani orebody, with the undergroundmineral resource estimate at the Bibiani Main Zone increasing by 288% to 2.68million oz Au and total global mineral resources increasing by 300% to 3.23million oz Au. Furthermore, our global underground resource estimate is inexcess of 2.5 million oz Au grading 2.66 g/t Au, which provides a goodindication and strong basis for sustainable mineral resource to ore reserveconversion. It also increases the Board's confidence in the potential for theadvancement of an economically sound long-life underground mining operation. In addition, post period end, we were pleased to report a circa fourfoldincrease (391%) in our underground Ore Reserve estimate to 1.05 million oz Au,following the revised mineral resource estimation announced in July. Theincrease in Ore Reserves is a direct result of continued geological assessment,refined mineral resource estimation procedures, as well as the optimisation ofmine planning and scheduling of the orebody. The Ore Reserve estimate further underpins the Board's confidence in thepotential for the development of a viable underground mining operation with atleast a ten year production life. Currently we are conducting a feasibilitystudy to assess extracting the reserves at a higher rate than our initiallyplanned 100,000 tonnes per month ('tpm'). The engineering design specificationsfor the conveyor system in the conveyor decline is for 200,000 tpm and theprocess plant is capable of treating 225,000 tpm. With growing confidence in thesustainability of the orebody, we feel there is a real opportunity to increaseour annualised ounce production to over 150,000 oz Au. We have also focussed on the production of tailings from the project. Productionfor the year ending 31 December 2007 is expected to be circa 40,000 oz, lessthan the targeted 50,000 oz previously reported, principally due to shortfallsof local power supplies and the breakdown of key equipment associated with thetailings operation, which has taken longer than anticipated to replace. However,we are now installing our own independent electricity generating capacity forthe underground project, which should help us overcome these problems in thefuture and ensure we are self sustaining. Importantly, we have also outsourcedthe tailings treatment to leading tailings specialist, Fraser Alexander Group,enabling us to focus on the long term value proposition for the Company, theunderground project, and ensuring that it is delivered on time and withinbudget. Positive developments on site continue. The bulk of the mining fleet has nowbeen delivered, and a team of local and expatriate underground bulk minespecialists have been hired to manage the project. First trial undergroundblasting and progress on ventilation raises were completed ahead of schedule,which allowed general mine development work to begin. Furthermore, stoping,which will open up the underground mine in preparation for its production, isexpected to begin imminently. An additional important milestone was achievedrecently with the start of the construction of the portal for the conveyordecline. Promising work also continues on the Mining Lease and the two prospectinglicences belonging to the Company. Bibiani has continued to fulfil its potential in providing us a multi-millionounce gold resource with global underground resources now standing at just underthree million ounces. Mali We have built a strong position in Mali through joint venture agreements andhave assembled a highly prospective portfolio of assets consisting of 22properties spanning over circa 2,500 sq km in the south and west of the country.We have identified five priority target properties where we are currentlyconducting extensive exploration programmes. Due to our increasing activitylevels, we have appointed Richard Dahl as our Mali Exploration Manager to manageoperations and lead a team of highly experienced professionals. Results from our first phase of systematic gold exploration at our properties inthe prospective Birimian strata in southern and western Mali have been highlyencouraging. Over 10,700 assays have been completed to date with 39 follow-upgold targets identified, of which 16 are being prioritised. Six are clusteredand structurally controlled gold anomalies and most notably, in the Yanfoliladistrict, we have identified a number of 2-7 km long clustered gold-in-soilanomalies. At our 154 sq km Medinandi permit within the prospective Kenieba district wehave concluded a successful field season. Exploration work has delivered aresource estimate of circa 500,000 oz Au grading 4.55 g/t Au, which reinforcesour belief that the area is highly prospective and may have significantproduction potential. Further gold anomalies for follow-up have also beenidentified with drilling work scheduled for Q4 2007 after the rainy season. Zimbabwe In February 2007, CAG acquired an 84.7% interest in Falcon Gold Zimbabwe Limitedand the entire issued share capital of Olympus Gold Mines Limited, twoZimbabwean based gold operations for an aggregate consideration of approximately£3.1 million (US$6.2 million). The supply of electricity has been somewhaterratic, which has had an effect on production, but we are looking at solutionsto overcome this. We are currently implementing comprehensive investmentprogrammes aimed at increasing production although I feel that last year was afantastic achievement considering the situation on the ground. We anticipateproducing in the order of 20,000 oz Au in FY 2007. We continue to be positive about the long-term prospects for Zimbabwe. Thecountry is resource rich and, with this foothold, I believe we are in a positionto take advantage of the country's potential. For the period under review, CAGhas invested £0.5 million into Zimbabwe via a £1.5 million loan structureapproved by the Reserve Bank of Zimbabwe, for the recapitalisation and expansionof these assets. Two assets in particular, Camperdown and Dalny, havesignificant potential and it is our intention to fast-track an exploration anddevelopment programme on these properties should the investment climate in thecountry be such that we are comfortable to commit significant amounts ofshareholder funds. The situation with regards to mine ownership has yet to be resolved, with activeand encouraging dialogue taking place between the mining industry and thevarious state bodies involved in the process. Promising signs of a policyacceptable to the mining industry have begun to emerge. Botswana We are in the process of increasing our 53% stake in Golden Tau Mining Ltd,which owns the exploration rights to a circa 400 sq km permit over theprospective Kraaipan greenstone belt in southern Botswana and the Companyexpects to make an announcement relating to this in due course. Exploration todate includes geological mapping, airborne geophysical surveys and limitedpercussion and diamond drilling. Results have indicated gold mineralisation butthe economic viability is yet to be determined. Financial Review During the period to 30 June 2007 turnover was £6.1 million from gold sales,with a gross profit of £0.4 million. A price of US$661 per ounce was achievedfrom the sale of 18,140 ounces which were produced at a cash cost of US$574 perounce. Operating summary statistics Ghana Zimbabwe* Group Sold Ounces 13,706 4,434 18,140Produced Ounces 13,600 4,434 18,034 Cash costs US $ per oz 545 663 574* 4 monthperiod Administrative expenses were £1.28 million (June 2006: £1.25 million) and theoperating loss for the period was just under £1.5 million (June 2006: £3million) or a loss of 0.32p per share (June 2006: 1.44p per share), animprovement of just over 60%, including share based payments of £0.4 million. Total assets increased to £34.5 million (June 2006: £9.5 million) mainly due tothe increased investments in Ghana and Zimbabwe as well as the capital expansionat Bibiani and exploration in Mali. Liabilities increased to £10.6 million, duemainly to the debt facility drawdown which has funded the capital expansion atBibiani. Cash at the end of the period decreased by £1.5 million to £3.7 million, ofwhich £1.4 million is restricted to fund the rehabilitation liability atBibiani. Outlook The past six months have seen many positive developments for CAG and I see noreason for this rapid pace of growth not to continue. Whilst our focus remainson the development of Bibiani, we continue to evaluate additional Africanprospects in Mali, Ghana, DRC, South Africa and Zimbabwe. We remain committedto generating good returns for our shareholders and are very excited about thefuture of the Company. I would like to take this opportunity to thank our staffand shareholders for their continued support and we expect to report furtherprogress soon. Greg HunterChairman and Chief Executive Officer Un-audited Consolidated income statement For the six months ended 30 June 2007 In thousands of pounds sterling Un-audited Un-audited Audited Six months ended Six months ended 12 months ended 30 June 2007 30 June 2006 31 Dec 2006 Revenue 6,057 - 487Cost of Sales (5,683) - (270) Gross Profit 374 - 217Selling expenses (133) - -Administrative charges (1,707) (3,016) (5,248) Administrative expenses (1,280) (1,249) (3,169) Share based payments (427) (1,767) (2,079) Fair values adjustments - - 945 Operating loss before financing costs (1,466) (3,016) (4,086)Financial income 45 66 338Financial expense (87) - (212) Loss before tax (1,508) (2,950) (3,960)Income tax expense - - (9) Loss for the year (1,508) (2,950) (3,969) Attributable to: Equity holders of the parent (1,470) (2,930) (3,938) Minority interest (38) (20) (31) Loss for the year (1,508) (2,950) (3,969) Basic and diluted loss per share (pence) (0.32) (1.44) (1.69) All activities were in respect of continuing operations Un-Audited Consolidated balance sheets For the period ended 30 June 2007 In thousands of pounds sterling Un-audited Un-audited Audited As at As at As at 30 June 2007 30 June 2006 31 December 2006Assets Property, plant and equipment 21,673 128 17,131 Exploration assets 3,448 436 560 Total non-current assets 25,121 564 17,691 Inventories 2,457 - 2,827 Trade and other receivables 3,225 89 2,330 Cash and cash equivalents 3,652 8,842 5,076 Total current assets 9,334 8,931 10,233 Total assets 34,455 9,495 27,924 Equity Share capital 471 266 459 Share premium 27,270 10,290 26,389 Other reserves (640) 41 68 Retained earnings (3,259) (1,602) (2,216) Total equity attributable to equity holders of the 23,842 8,995 24,700parentMinority interest 28 67 39 Total equity 23,870 9,062 24,739 Liabilities Long-term debt 5,026 - - Provisions 1,352 - 1,389 Deferred taxation 872 - 383 Total non-current liabilities 7,250 - 1,772 Trade and other payables 3,327 433 1,404 Taxation 8 - 9 Total current liabilities 3,335 433 1,413 Total liabilities 10,585 433 3,185 Total equity and liabilities 34,455 9,495 27,924 Statement of cash flows For the period ended 30 June 2007 In thousands of pounds sterling Audited Un-audited Un-audited Twelve months Six months ended Six months ended ended 30 June 2007 30 June 2006 31 December 2006Cash flows from operating activitiesLoss before tax (1,508) (2,950) (3,960)Adjusted for:Financial income (45) (66) (338)Financial expense 87 - 212Share based payment 427 1,767 2,079Depreciation 469 3 97Impairment - - 25Fair value adjustment - - (945)Exchange rate adjustments (136) - (153)(Decrease) / increase in inventories 356 - (263)(Increase)/decrease in trade and other (725) (37) (1,774)receivablesIncrease/(decrease) in trade and other payables 1,900 225 1,023 Net cash generated by (utilised in) operating 825 (1,058) (3,997)activities Cash flows from investing activitiesInterest received 45 66 338Acquisition of business net of cash (3,152) - (18,385)Acquisition of exploration assets (2,947) (159) (298)Acquisition of property, plant and equipment (2,121) (131) (378) Net cash from investing activities (8,175) (224) (18,723) Cash flow from financing activitiesIncrease in long term liabilities 4,980 - -Increase in minorities 11 - -Proceeds from the issue of share capital 893 8,930 25,222 Net cash from financing activities 5,884 8,930 25,222 Net increase in cash and cash equivalents (1,466) 7,648 2,502Cash and cash equivalents at 1 January 5,076 1,194 1,194Cash acquired (restricted) 81 - 1,390Effect of exchange rate fluctuations on cash (39) (10)held Cash and cash equivalents 3,652 8,842 5,076 Included in cash at 30 June 2007 is restricted cash of £1.38 million, beingfunds held to fund the rehabilitation liability in Ghana. Statement of recognised income and expenses For the six months ended 30 June 2007 In thousands of pounds sterling Audited Un-audited Un-audited Twelve months Six months ended Six months ended ended 30 June 2007 30 June 2006 31 December 2006 Foreign exchange translation differences (240) 41 68 Net income recognised directly in equity (240) 41 68 Loss for the period (1,508) (2,950) (3,969) Total recognised income and expense for the year (1,748) (2,909) (3,901) Attributable to: Equity holders of the parent (1,710) (2,889) (3,870) Minority interest (38) (20) (31) (1,748) (2,909) (3,901) Notes to the Interim AccountsFor the six months ended 30 June 2007 1. Basis of preparation The financial information contained in this interim report does not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985.The figures relating to the year ended 31 December 2006 have been extracted fromthe audited accounts which have been filed with the Registrar of Companies andreceived an unqualified audit report which did not contain a statement undersection 237(2) or (3) Companies Act 1985. The consolidated financial statements incorporate those of Central African GoldPlc and its subsidiary undertakings for the period. The current and thecomparative half year to June are un-audited and have been prepared usingaccounting policies and practices consistent with those adopted in the accountsfor the year ended 31 December 2006. The financial statements are presented in pounds sterling, rounded to thenearest thousand. The preparation of financial statements in conformity withIFRSs requires management to make judgements, estimates and assumptions thataffect the application of policies and reported amounts of assets andliabilities, income and expenses. The estimates and associated assumptions arebased on historical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis ofmaking the judgements about carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision affects only that period or in the period ofthe revision and future periods if the revision affects both current and futureperiods. Judgements made by management in the application of IFRSs that have significanteffect on the financial statements and estimates with a significant risk ofmaterial adjustment in the next year are in respect of the share-based payments,and the fair value adjustments, rehabilitation provision and mineral reservesand resources. The accounts have been prepared on a going concern basis. As is common with manymining companies, the company raises money for exploration and capital projectsas and when required. There can be no assurance that the group's projects will be fully developed inaccordance with current plans or completed on time or to budget. Future work onthe development of these projects, the levels of production and financialreturns arising there from may be adversely affected by factors outside thecontrol of the group. In May 2007 the Group completed the raising of a debt facility, which is not initself sufficient to enable the Group to fund all aspects of its operations,exploration and working capital requirements over the next 12 months from thedate of the financial statements. The directors believe that it will be able tosecure the necessary financing through a combination of the issue of new equityand debt instruments. However, there is no assurance that the Group will be successful in theseactions. These financial statements do not reflect the adjustments, which couldbe material, to the carrying value of assets and liabilities, the reportedrevenues, expenses and balance sheet classifications that would be necessarywere the going concern assumption inappropriate. 2. Foreign currencies Transactions in foreign currencies are recorded using the rate of exchangeruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated using the contracted rate orthe rate of exchange ruling at the balance sheet date and the gains or losses ontranslation are included in the profit and loss account. Other exchangedifferences are dealt with in the profit and loss account. The assets and liabilities of overseas subsidiary undertakings are translated atthe closing exchange rates. Profit and loss accounts of such undertakings areconsolidated at the average rates of exchange during the year. Gains and lossesarising on these translations are taken to reserves, net of exchange differencesarising on related foreign currency borrowings. The group has certain operations in Zimbabwe, which is a hyper-inflationaryeconomy. The group's policy is that the functional currencies of thesesubsidiaries is the US dollar. Transactions denominated in Zimbabwean dollarsand other currencies are translated into US dollars at the rate prevailing atthe date of the transaction or the average exchange rate as appropriate.Monetary assets and liabilities are retranslated into US dollars with theresulting exchange differences recorded in the profit and loss account. In translating Zimbabwean dollar transactions into US dollars, the group hasused the Old Mutual implied rate, rather than the official rate, since the OldMutual rate gives a more accurate representation of the purchasing power ofZimbabwean dollars. The assets and liabilities and profit and loss accounts ofoverseas undertakings in Zimbabwe are then translated into the reportingcurrency as described above. The Old Mutual rate is calculated by dividing the Old Mutual Plc share price onthe Zimbabwe Stock Exchange by the Old Mutual Plc share price on the LondonStock Exchange. The directors note that, since the official exchange rate is notfreely floating, it does not reflect the impact of the hyper-inflationaryeconomy on the value of the Zimbabwean dollar. The group has applied an average of the Old Mutual rate during the year totransactions denominated in Zimbabwean dollars and recorded in the profit andloss account. The effective rate is Z$46,214 to US$1. The group has applied arate of Z$124,856 to US$1 to the assets and liabilities denominated inZimbabwean dollars. 3. Earning per share Basic and diluted loss per share is calculated by reference to the loss for thefinancial period and the weighted average number of shares in issue during theperiod of 466,737,727 (June 2006: 204,972,579). 4. Acquisitions Effective 1 March 2007, CAG acquired 84.7% of Falcon Gold Mines Limited and 100%Olympus Gold Mines Limited. Further details are contained in the Chairman'sstatement. The value of the net assets acquired are as followsIn thousands of pounds sterling Book value at Revaluation of Estimated fair acquisition Mineral rights value at time of acquisitionProperty plant and equipment 199 3,101 3,300Inventory 169 169Receivables 31 31Restricted cash 81 81Payables (387) (387)Deferred tax (30) (30) Total net assets acquired 63 3,101 3,164 Satisfied by Cash 2,285 Shares 868 Minorities 11 3,164 These fair values are based on the preliminary valuation of the underlyingassets and management will update these within twelve months of the acquisition. 5. Subsequent events Subsequent to the date of these financial statements a. On 31 July 2007 it issued 2,700,054 new ordinary shares of 0.5p each, subject to admission to trading on AIM, pursuant to the exercise of options held by Greg Hunter (Chief Executive) and Mark Rosslee (Chief Financial Officer), both of whom are directors of the company, and a number of other senior managers. b. Implemented a hedge on 7 September 2007 for just over 59,000 ounces of gold at an average price of US$730 per ounce. This was in terms of the debt facility with Investec Bank Limited and the hedge is in place for the period November 2007 to February 2010. c. Drawn down a further £2 million of the debt facility to fund the capital expansion of the Bibiani gold mine in Ghana. At the date of these financial statements £5 million of the total £7.5 million facility had been drawn down. 6. Reconciliation of Movement in Equity Shareholders' Funds In thousands of pounds sterling Un-audited Un-audited Audited Six months ended Six months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 Loss for Period (1,470) (2,930) (3,938)Net proceeds from issue of shares 893 8,930 25,222Effect of currency exchange movements (240) (41) 68Deferred tax adjustment on acquisitions (468) - -Share option reserve movement 427 1,767 2,079 Net increase (decrease) in shareholders' (858) 7,726 23,431fundsOpening Shareholders' Funds 24,700 1,269 1,269 Closing Shareholders' Funds 23,842 8,995 24,700 7. Segmental InformationIn thousands of pounds Ghana Zimbabwesterling Un-audited Un-audited Audited Un-audited Un-audited Audited Six months Six months 12 months Six months Six months 12 months ended ended ended ended ended ended 30 June 2007 30 June 2006 31 December 30 June 2007 30 June 2006 31 December 2006 2006 Revenue 4,571 - 487 1,486 - -Profit/(loss) before tax 32 - 980 21 - -Income tax - - (9) - - -Profit/(loss for the year 32 - 971 21 - -Segment assets 27,869 - 22,297 3,994 - -Segment liabilities (8,536) - (2,902) (885) - -Total net assets 19,333 - 19,395 3,109 - -Capital expenditure 3,771 - 26 95 - -Depreciation 400 - 67 18 - - In thousands of pounds Mali Botswanasterling Un-audited Un-audited Audited Un-audited Un-audited Audited Six months Six months 12 months Six months Six months 12 months ended ended ended ended ended ended 30 June 2007 30 June 2006 31 December 30 June 2007 30 June 2006 31 December 2006 2006Revenue - - - - - -Profit/(loss) before tax - (84) (222) 11 (34) (55)Income tax - - - - - -Profit/(loss for the year - (84) (222) 11 (34) (55)Segment assets 1,677 154 658 252 319 269Segment liabilities (268) - (36) (36) (67) (62)Total net assets 1,409 154 622 216 252 207Capital expenditure 1,094 130 362 (51) 6 29Depreciation 13 - 4 - - - In thousands of South Africa Head Office Grouppounds sterling Un-audited Un-audited Audited Un-audited Un-audited Audited Un-audited Un-audited Audited Six months Six months 12 months Six months Six months 12 months Six months Six months 12 ended ended ended ended ended ended ended ended months 30 June 30 June 31 30 June 30 June 31 30 June 30 June ended 2007 2006 December 2007 2006 December 2007 2006 31 2006 2006 December 2006 Revenue - - - - - - 6,057 - 487Profit/(loss) (630) (252) (1,524) (942) (2,580) (3,139) (1,508) (2,950) (3,960)before taxIncome tax - - - - - - - - (9)Profit/(loss for (630) (252) (1,524) (942) (2,580) (3,139) (1,508) (2,950) (3,969)the yearSegment assets 505 125 314 158 8,897 4,386 34,455 9,495 27,924Segment (27) (98) (70) (833) (268) (115) (10,585) (433) (3,185)liabilitiesTotal net assets 478 28 244 (675) (8,269) (4,271) 23,870 9,062 24,739Capital 159 119 259 - 35 - 5,068 290 676expenditureDepreciation 38 2 26 - - - 469 2 97 8. These interim accounts were approved by the directors on 28 September 2007. * * ENDS * * For further information please contact or visit www.centralafricangold.com orcontact: Central African Gold PlcGreg Hunter/Nicole Broome Tel: +27 (0) 11 676 2500 London:St Brides Media & Finance LtdHugo de Salis/Felicity Edwards Tel: +44 (0)20 7242 4477 Strand Partners LimitedSimon Raggett /Braden Saunders Tel: +44 (0)20 7409 3494 RBC Capital MarketsMartin Eales/Andrew Smith Tel: +44 (0) 20 7029 7881 South Africa:Russell and AssociatesCharmane Russell Tel: + 27 11 880 3924 Mob: + 27 82 372 5816 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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