22nd Jan 2010 07:00
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Immediate Release
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22 January 2010
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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 2007/0192231/10)
ISIN: GG00B24HM601
Share code on LSE: CRND
Share code on JSE: CRD
Placing and Operational Update
Highlights
Placing of 24,691,964 ordinary shares at 15p per share to raise £3.7 million (US$6.0 million).
Placing proceeds to be utilised to complete the Company's trial mining operations.
Proposed board changes:
Michael McMahon to become Chairman of the Company at the next AGM.
Jerome Brauns to join the board as non-executive director.
CFO of the Company, Patrick Malaza, to join the board as Finance Director.
Mine development proceeding as planned.
Reef development has exposed main reef.
All equipment to complete the trial mining will be on site in January 2010.
First stoping block being prepared for extraction by February 2010.
Two optimisation studies, which have been reviewed by Snowden, indicate significant upside to the economic viability of the project.
CRG remains on track to complete the trial mining by end of the first quarter of 2010.
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) Limited +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) Limited +27 (0) 11 506 7300
Jenni Newman / Megann Outram
The presentation utilised by the Company as part of its recent institutional road show is available on the Company's website: www.centralrandgold.com.
The Placing
Central Rand Gold Limited ("CRG" or the "Company") announces today that it has placed a total of 24,691,964 new ordinary shares of 1p each in the capital of the Company (the "Placing Shares") at a price of 15p per Placing Share to raise £3.7 million (US$6.0 million) (the "Placing"). The Placing has been supported by the Directors and senior management and certain existing substantial shareholders. 23,781,964 Placing Shares have been placed using a cash box structure with existing investors and 910,000 Placing Shares have been placed with Directors and senior management of the Company.
The Placing Shares represent 9.99 per cent. of CRG's existing issued ordinary share capital and 9.09 per cent. of the issued share capital of the Company as enlarged by the Placing. The Placing price of 15p per share represents a discount of 4.76 per cent. to the closing mid-price on 21 January 2010 of 15.75p per share. The Placing has been underwritten by Evolution Securities Limited ("Evolution"). Full details of the Directors' and senior management's participation in the Placing are shown below:
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Director/Senior Manager |
Position |
Current Shareholding* |
Placing Shares subscribed for |
Shareholding at Admission |
% of Enlarged Issued Share Capital |
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Alastair Walton |
Chairman |
4,600,000 |
460,000 |
5,060,000 |
1.86 |
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Michael McMahon |
Non-executive Director |
200,000 |
20,000 |
220,000 |
0.08 |
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Johan Du Toit |
Chief Executive Officer |
- |
100,000 |
100,000 |
0.04 |
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Miklos Salamon |
Non-executive Director |
950,000 |
95,000 |
1,045,000 |
0.38 |
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Nick Farr-Jones |
Non-executive Director |
300,000 |
30,000 |
330,000 |
0.12 |
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Robert Kirkby |
Non-executive Director |
1,050,000 |
105,000 |
1,155,000 |
0.43 |
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Donovan Harper |
Head of Mining |
- |
100,000 |
100,000 |
0.04 |
* Includes the Director share grants which vested on the first anniversary of the Company's admission to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange and the Main Board of the JSE Limited as disclosed in the prospectus published by the Company on 1 November 2007.
The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 1p each in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares after the date of issue of the Placing Shares. The Placing is being made on a non-pre-emptive basis.
The Company will apply for admission of the Placing Shares to the Official List of the Financial Services Authority, to trading on the Main Market of the London Stock Exchange and trading on the JSE Limited ("Admission"). It is expected that Admission will take place and that trading will commence on 27 January 2010 (the "Closing Date").
The Placing is conditional upon, inter alia, Admission becoming effective and the placing agreement between the Company and Evolution not being terminated.
The proceeds of the Placing will provide sufficient working capital for the Company to complete its trial mining operations. Following the completion of the trial mining, the Company will need to raise additional equity finance, which it currently intends to do by way of a pre-emptive offering, to provide sufficient funds for the completion of the Company's mine development plan. It is envisaged that the pre-emptive offering will be announced by the end of April and is expected to raise between US$25 and US$35 million.
As at 31 December 2009 the Company had approximately US$14.9million cash on hand.
Use of proceeds
The funds raised will be utilised to complete the Company's trial mining activities in order that the Company can prove up the viability of its proposed mine plan. The Company intends that the results of the trial mining will be reviewed by Snowden Mining Industry Consultants ("Snowden") which will produce a revised Mineral Expert's Report for inclusion in the prospectus that the Company will be required to produce as part of its proposed pre-emptive fundraising.
The Directors believe that it would not be prudent to undertake a larger equity fundraising before the completion of trial mining. The successful completion of the trial mining will significantly de-risk the project as it is expected to prove the economic viability of the Company's mining project.
Board Changes
The Company announces changes to the Board of Directors. The Company's succession plan has been in place since 2008 and the Board has now deemed it an appropriate time to implement the changes.
Alastair Walton and Robert ("Bob") Kirkby, who retire by rotation at the 2010 Annual General Meeting, will not be proposed for re-election. Patrick Malaza, the Group's current Chief Financial Officer, and Jerome Brauns will be appointed as Finance Director and Non Executive Director respectively in February 2010. Michael McMahon will replace Alastair Walton as the Non Executive Chairman and Miklos Salamon will succeed Robert Kirkby in the position of senior independent Non Executive Director. It is the current intention that Jerome Brauns will replace Michael McMahon as Central Rand Gold South Africa (Pty) Limited's Non Executive Chairman.
Michael McMahon is a leading South Africa-based mine development engineer, with an established track record of asset development having worked in a variety of management roles and, latterly, at board level in a number of major international mining companies. Michael was a Non- Executive Director of Gold Fields Limited from 1999 to 2008 and serves as Non-Executive Director of Impala Platinum Holdings Limited. Previously, he was Chief Executive of Impala Platinum Holdings Limited from 1990 and Executive Chairman from 1993 through to 1998.
Commenting on the Board changes, Johan du Toit, Chief Executive Officer, stated, "Alastair has helped shape and lead the business through an extremely challenging period. With the succession plan in place, he has now deemed it appropriate for him to continue to pursue his personal interests. His leadership, effort and passion have been much appreciated by the Board and we wish him every success in his future endeavours. Michael McMahon was brought into the Company in 2008 as part of the Company's succession plan to eventually replace Alastair.
Bob's contribution has also been invaluable. We would like to express our gratitude for his guidance and vision that have helped to progress the business to where it is today.
Jerome Brauns, aged 51, a prominent South African advocate and a member of the Black Lawyers' Association, has been assisting the Company in various legal matters and has spent a great deal of time understanding the business over the past year. The value that he has added to date has been exemplary and we look forward to his continued input and guidance. It is the current intention that Jerome will succeed Michael McMahon as chairman of CRG's operating subsidiary Central Rand Gold South Africa (Pty) Limited.
As a natural progression, Patrick Malaza, aged 48, who joined the group in 2009, is to be appointed to the Board of Directors as Finance Director. Patrick is a qualified Chartered Accountant (South Africa) and has had extensive work experience at Safmarine Ltd (1994-95), an international shipping and freight forwarding company, Engen Petroleum Ltd (1995-2001), a major downstream oil and petroleum products company, and most recently at Transnet Freight Rail, the South African state freight distributor (2001-09) where he attained the position of Project Director and regional Chief Financial Officer.
Patrick has proven himself to be a valuable member of the executive team and we would like to congratulate him on this promotion."
There are no other matters requiring disclosure under Listing Rule 9.6.13 regarding the appointments of Jerome Brauns and Patrick Malaza.
Operational Update
Mine development
Progress on trial mining at Slot 8 can be summarised as follows:
657m of decline and cross cut development has been completed;
the Main Reef has been accessed at four points;
82m of ore drive development has been completed; and
an estimated 10,000t of Main Reef, middling, sweeping and vamping has been recovered at an average estimated mine grade of 2.4g/t.
Reef development has been very encouraging. Cable bolts have been installed into the hangingwall. This bolting strategy has proven to be very successful in providing stability and allowing safe excavation of the reef drive. This is a significant milestone for the mining operations.
The current reef drive width of 4.5m is expected to be reduced to 3.5m with the arrival of a single boom drill jumbo at the end of January 2010. The production longhole drill has been secured and is expected on site at the end of January 2010.
Two Trial Stoping Blocks ("TSB") have been identified, namely TSB01 and TSB02. The TSBO1 trial block will primarily test the new optimised geotechnical pillar strategy. In the initial Snowden pre-feasibility study, cemented tailings were used as the primary support specification. A subsequent study has developed a significantly stronger and less expensive method of support using a Cemented Aggregate Fill ("CAF"). CAF is used extensively in the mining industry in Australia and has proven to be very successful in allowing maximum pillar extraction. TSB02 is expected to be completed in February 2010.
The South Reef has now been accessed on the old 6 level (approximately 90m below surface). Visual inspections of the old workings have identified sweepings and vampings (old auriferous ore left behind) over a 300m strike. The South Reef will however require rehabilitation and support before sweepings and vampings operations can commence. The old 6 level of the South Reef will form the upper access. Within the next three months access to the old 7 level below is scheduled to allow selected sweepings and vampings operations to commence between the 6 and 7 levels. Vampings grades have returned very encouraging early results between 2g/t to 10g/t
As previously announced in the Interim Management Statement released in November 2009, a bulk sample of reef development had been sent to MINTEK for optical sorting. The initial results are promising as there is good visual separation of the Main Reef ore from the quartzite waste. Assays to determine the potential upgrade of a bulk product are expected in late January 2010 along with an independent report on the findings. Success with the optical sorting will allow bulk mining of the underground development and stope material with separation being carried out on the surface, creating high grade and low grade ore streams to maximise recovery through the plant. It is expected that production would ramp up significantly quicker than previously planned.
Recent Optimisation Studies
During the latter part of 2009, CRG undertook two optimisation studies.
1. Alternative geotechnical strategy
The initial mine plan was based on installing 3m wide backfill bags spaced 12m apart (skin to skin) in the stoped out Main Reef Leader void. The parting and Main Reef between the backfill bags are then stoped. Although these backfill bags provide early support for the Main Reef Leader, about 25% of the underlying Main Reef is sterilised. CRG now proposes a backfilling method where a 3m wide trench is initially cut in the middling and Main Reef and then filled using a backfill bag and cemented backfill. The parting and Main Reef are then extracted. This method will reduce ore sterilisation in the Main Reef stopes to about 5%.
2. Metallurgical processing options
The Company's baseline concept was for all the ore to be processed firstly through the crushing and concentrating plants (gravity and flotation) after which only the concentrate would be processed through the centralised Carbon-In-Leach ("CIL") plant achieving an overall 80% metallurgical recovery. CRG has modified the metallurgical profile by directly processing a percentage of ore (selected higher grade) through the CIL plant. Modifications are required to improve the performance of the CIL plant, to achieve this profile change, amounting to US$1.2 million. The benefit of this change is that the metallurgical recovery is expected to improve to 86 per cent.
The impact of improvement in stope recovery and metallurgical recovery results in a 30 per cent. increase in recovered gold and a 98 per cent. increase in EBIT (assuming a gold price of US$900/oz) with an average operating cost of about US$576/oz and an operating plus capital cost of about US$745/oz.
Snowden has reviewed and validated the outcomes of the studies. Please refer to the memorandum from Snowden on the validation of CRG's optimisation studies contained within Appendix 1 to this announcement.
Metallurgy
In 2009, CRG produced 40,000oz less gold than it had originally anticipated, as a result of lower throughput and recoveries (less than 60%), which has had a significant impact upon expected cash flows.
Metallurgical control has improved over the last quarter, particularly in December 2009, and the Company is now achieving tailings grades comparable with industry norm for Witwatersrand gold ores at 0.18g/t - 0.3g/t. Engineered solutions are being implemented to eliminate current processing bottlenecks. Overall metallurgical recovery is expected to improve by directing a portion of the highest grade run-of-mine ore feed directly to the CIL with the balance first being processed through the concentrator.
An independent study completed by GR Engineering in Perth, Australia indicates that the CIL could be upgraded and modified to increase the overall recovery from 86 per cent. to 95 per cent. The total cost for upgrade was estimated at US$11 million.
BEE Update
The ongoing dispute between the Company and its BEE partner Puno Gold Investments (Pty) Limited ("Puno") regarding the operational funding for Central Rand Gold South Africa (Pty) Limited is expected to go to arbitration in the first quarter of this year. Further updates regarding the arbitration process will be made as appropriate.
Outlook
The key focus of the Company is the completion of the trial mining, which, if successful, will validate the Company's mine plan. The Company will then look to raise between US$25-35 million in a pre-emptive issue to provide funds to further develop its mine in order that it can achieve a sustainable gold production rate of 55,000oz per annum.
In addition, CRG will continue to undertake exploration work to identify and develop new mining areas within CRG's New Order Mining Right area.
The information in this statement has been reviewed and approved in writing by Mr. Keith Matier, BSc (Hons), GDE, Pr Sci Nat, who is a competent person in terms of the SAMREC and JORC codes. Mr. Matier is Geology Manager of Central Rand Gold South Africa (Pty) Ltd and has over 16 years experience in exploration, mineral resource management and mining.
Appendix 1: Memorandum from Snowden Mining Consultants on validation of CRG's optimisation studies.
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Memorandum |
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To: |
Johan du Toit |
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Company: |
Central Rand Gold |
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From: |
Allan Earl |
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Date: |
14 January 2010 |
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Project: |
CRG Trial Mining |
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Subject: |
Impact of revised modifying factors |
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During August 2009 Snowden Mining Industry Consultants ('Snowden') prepared a mine inventory for the Main Reef (MR) at CMR of 2.2 Mt at 4.1 g/t, inclusive of a Probable Ore Reserve of 2.1 Mt at 4.1 g/t and 0.1 Mt derived from an Inferred Resource. The mine inventory was used to generate a cash flow model, which generates a positive undiscounted EBIT of ZAR182 M at an average operating cost of about ZAR4,640/oz (US$580/oz) and an operating plus capital cost of about ZAR6,400/oz (US$800/oz). The mine inventory recovers 231,000 oz (at 80% metallurgical recovery).
CRG has recently completed two optimisation studies. The first study reviewed an alternative backfilling strategy. The current mine plan is based on installing 3 m wide backfill bags spaced 12 m apart (skin to skin) in the stoped out Main Reef Leader void. The parting and Main Reef between the backfill bags are then stoped. Although these backfill bags provide early support for the Main Reef Leader hangingwall, about 25% of the underlying Main Reef is sterilised. CRG evaluated a backfilling method where a 3 m wide trench is initially cut in the parting and Main Reef and then filled using a backfill bag and cemented backfill. The parting and Main Reef are then extracted. This method will reduce ore loss in the Main Reef stopes to about 5%.
The second study reviewed the processing options. The current mine plan is to process ore using gravity and flotation concentration, followed by CIL. This process recovers about 80% of the contained gold. CRG now proposes to modify the CIL plant at a cost of about US$1.2 M to achieve 86% metallurgical recovery
Snowden has evaluated the potential impact of these two studies on the mine plan cash flow model. The main changes to the August cash flow model are:
The revised backfilling strategy results in only 5% of the Main Reef being sterilised by the backfill pillars compared with 25% previously.
The stoping cost, including labour, was recalculated to be ZAR225/t ore compared with ZAR194/t ore previously.
The processing operating cost was increased from ZAR103/t to ZAR145/t.
The processing capital cost was increased by ZAR9 M for the CIL upgrade.
The overall metallurgical recovery was increased from 80% to 86%.
The improvements in stope recovery and metallurgical recovery result in a 30% increase in recovered gold and a 98% increase in EBIT. The average operating cost is ZAR4,600/oz (US$576/oz) and the operating plus capital cost is ZAR6,000/oz (US$745/oz). The August cash flow model was based on a gold price of ZAR7,200/oz. At the current spot price of ZAR8,176/oz (based on US$1,120/oz at ZAR7.3:US$), the EBIT increases by about 200%.
The project is very sensitive to small changes in modifying factors. CRG's current focus to improve metal recovery from stoping and process recovery) is strongly endorsed as there is a significant impact on the project value. The practical implementation of the revised backfill strategy must still be tested in the trial mining environment before these changes can be incorporated in a revised Ore Reserve estimate.
Related Shares:
Central Rand Gold