Preliminary Audited Annual Results

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

7 June 2010

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

Preliminary Audited Annual Results

Central African Gold Plc, the AIM traded gold mining and exploration company, announces its audited annual results for the year ended 31 December 2009.

Chief Executive Officer's Statement

Overview

The 2009 year under review has certainly proved to be one of the most challenging in CAG's history. The challenges have continued into 2010, with the Board's main focus being to secure the funding and significant cost reductions that are required both to maintain the business in the short term and also to develop the Group's quality gold mining properties in Zimbabwe in the medium to long term. In order for the current debt resources to sustain the Group for the next 12 months, significant cost reductions are required. The current position of the Group, in terms of going concern, is considered more fully in the basis of preparation to the financial statements.

As reported in the 2008 Annual Report, despite undertaking a number of initiatives to improve the operational performance at the Company's Bibiani mine in Ghana, the Company failed to commercialise the mine.

In January 2009, Central African Gold Ghana Limited ("CAG Ghana"), which owns the Bibiani mine, received notice from Investec Bank ("Investec") regarding the non-payment of monies due on the Investec project loan facility agreement and the non-payment of monies due under various gold forward transaction agreements. Investec demanded a full repayment of more than US$20 million from the Company.

Following the demand for repayment, Investec invoked its power of attorney under the charge over the Company's shares in CAG Ghana and transferred the Company's 100 per cent. equity interest in CAG Ghana to Investec, making it the legal owner of the Bibiani mine.

The Company undertook a placing in April 2009 to raise £5.7 million (US$8.0 million), before expenses, to contribute to the settlement of the US$5.0 million guarantee to Investec.

Simultaneously with the placing, the Company negotiated a partial conversion of the loan notes entered into in June and July 2008 (the "Loan Notes"). Investec Asset Management converted US$1.0 million of the US$3.0 million advanced into new ordinary shares at 0.9p immediately following the placing. Emerging Capital Partners converted US$2.4 million of the US$3.94 million initially advanced into new ordinary shares at 0.9p immediately following the placing.

As a consequence of the placement of shares and the partial conversion of the Loan Notes, the majority of the shares in the Company are now held by three shareholders - Emerging Capital Partners ("ECP") now own 50.02 per cent., HBD Zim Investments Limited ("HBD") own 28.18 per cent. and Investec Asset Management ("IAM") own 10.48 per cent.

During the year, the Board resolved to focus on the Zimbabwean assets, which, in December 2008, the Company had announced had ceased operations in common with a number of other mining operators in the country due to the adverse economic climate that prevailed. This was exacerbated at the time by an inadequate system of gold payment by the Reserve Bank of Zimbabwe and chronic shortages of electricity. The mines remained on care and maintenance until March 2009 when the Dalny and Old Nic mines were re-opened to test the new Zimbabwean gold system.

The Board also announced its intention to dispose of the Mali exploration portfolio, a decision based on the relatively early stage of development of these assets, as well as the difficulty of managing them remotely.

CAG subsequently announced the disposal of the Mali portfolio for a total consideration of US$5.0 million to Colonial Resources Limited, as announced on 21 December 2009.

IAM and ECP agreed to defer the payment of the shareholder loans of US$2.2 million (plus accrued interest) to the earlier of the sale of the Mali assets or 14 April 2010. Simultaneously with the provision of additional convertible loan notes to the Company in December 2009, the maturity date was extended to April 2011. As announced on 4 June 2010, the maturity date has been further extended to April 2012.

Zimbabwe

Following a decision to cease production in Zimbabwe and place the mines on care and maintenance in December 2008, as a result of both the adverse economic climate that prevailed in Zimbabwe at that time and the capital constrained position of the Company, the year commenced relatively slowly. However, a number of far reaching policy decisions have been taken at government level, which could lead to the rejuvenation of the Zimbabwean gold industry.

On 2 February 2009, the Governor of the Reserve Bank of Zimbabwe ("RBZ") released a Monetary Policy Statement ("MPS"). The proposed changes detailed in the MPS have had a significant and positive impact on the Company's ability to resume its Zimbabwe gold mining operations:

·; Gold producers, after receipt of a Gold Export Permit, are permitted to be in control of their gold sales: gold companies are able to produce and sell gold and receive payment for their bullion within normal trade terms, as such gold production may be marketed outside of the control of the RBZ.

·; Proceeds from the sale of bullion in foreign exchange may be held indefinitely, as compared to the previous requirement to convert any remaining foreign exchange to local Zimbabwe currency within thirty days of receipt.

·; Gold producers have been given the freedom to access certain financial instruments, such as gold loans from offshore markets, that would then be collaterised by their own physical gold inventory.

·; All current outstanding receivables owed to gold producers, have been converted into a "Special Tradable Gold-Backed Foreign Exchange Bond", which has a term of 12 months and will pay interest at eight per cent. per annum upon maturity. The interest owed is to be accrued from the time that the money has been outstanding.

Furthermore, the RBZ has laid out certain measures to significantly de-regulate Zimbabwe's exchange control policies. These measures include the ability of gold producers to pay for goods and services offshore, as well as all genuine external debts and dividends without prior Exchange Control approval. 

The Directors believe that these reforms, together with political changes in Zimbabwe, including, inter alia, the agreement by all parties in February 2009 to establish a Government of National Unity are promising and have enabled the Company to restart gold production in Zimbabwe, albeit at limited levels initially.

The Dalny and Old Nic mines were re-opened to test the system in the hope that all Falcon and Olympus mines could be restarted. I am pleased to confirm that the system is working and that realistic prices are being achieved. In June 2009, the Falcon and Olympus boards decided to reopen Golden Quarry and Camperdown mines, and initiated negotiations to raise further funds to cover the initial costs. 

Unfortunately, the expected increase in foreign direct investment into Zimbabwe did not materialise and this has severely affected the level of liquidity in the Zimbabwean financial market. A lack of suitable credit lines and the unsustainably high cost of capital have prevented the resumption of operations at Golden Quarry and Camperdown and have also affected the level of operations at Old Nic and Dalny.

It must be stated that the country is still a tough environment in which to operate. The Board anticipates that electricity shortages will continue, the country is short of skilled labour and the plant and equipment is very run down. Furthermore, the country's decision to dispense with the Zimbabwe Dollar and use US Dollar as the legal tender means that there is virtually no history of costs in the "new" currency.

While noting that re-investment in the industry is becoming more attractive, the Board has identified the need for a more coherent strategy for the rejuvenation and recapitalisation of the mines, particularly in light of the operating environment and the Company's financial position.

Subsequent to the Company's year end, the Board has engaged the services of a mining engineering consultancy to conduct a high level review of the operations in Zimbabwe, including a review of the mining practices in place. The quality of the assets and the further exploration potential evident from an examination of the Group's geological data was confirmed. A number of recommendations have been made to assist in the optimisation of the assets going forward, which are currently being assessed by the Directors.

In addition thereto, a 2D desktop structural study has also been commissioned, utilising the services of Dr Robin Harris over the large 15km strike within the Dalny claim portfolio, using processed Aster and Quickbird satellite imagery. This will provide the necessary geological framework (lithology and structural features) to allow for a greater understanding of the controlling features of the numerous mineralized ore bodies within the claims. The results will allow for a more optimised exploration program to be employed in the near future.

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

The Board is in the process of assessing where significant cost reductions can be made throughout the Group. The Board believes that the achievement of these reductions will be challenging, requiring close management and a further improvement in controls over expenditure, that are necessary to put the Company on a stronger financial footing.

In concluding this summary, I would like to record my appreciation of the hard work and determination with which my fellow Directors and management have addressed our problems this year.

Outlook

After a turbulent start to the year, we are now focused on advancing our assets in Zimbabwe, which we believe offer good mid to longer term prospects. With this in mind, our immediate aim is to move into a cash positive position and then expand production at our Zimbabwe mines. Eventually, we will look at the wider portfolio of existing assets, with a view to enhancing their value. External approaches from potential investors and technical reviews have all confirmed the potential of our assets. However, the Company remains significantly constrained by the lack of capital and the Directors do not see this constraint lessening during 2010. 

The Board continues to remain cautiously optimistic about the recovery of Zimbabwe's mining sector. The substitution of the US Dollar and other hard currencies for the Zimbabwean Dollar seems to have vanquished hyperinflation, as well as the recent World Bank grant, its first to Zimbabwe since 2001, all point to an improvement in operational conditions. 

Mines in Zimbabwe have suffered from years of under-capitalisation, as well as a lack of development and exploration. The gold industry is very fragmented and would benefit from a consolidation. The former hyper-inflationary environment, together with the past state monopoly on gold sales, has eroded the working capital of companies. Despite initial optimism, the expected flow of funds to restore liquidity to the financial sector has not taken place. External investors have avoided investing further, pending clarification of proposed policy changes. The recapitalisation of the mines is therefore constrained by the operating cash flows of those mines.

Power supplied to the mines remains erratic, which negatively affects production and plant efficiencies. The frequency of unscheduled power outages has decreased, although scheduled power outages have increased of late.

The exodus of skills from Zimbabwe has had a profound effect on operations, which has resulted in a required premium to retain and attract suitably skilled staff, particularly in the mining discipline. This has created an artificial level of remuneration which is not sustainable in the longer term.

The political situation in Zimbabwe remains challenging. Statements regarding the implementation of the Indigenisation Act, which requires that 51 per cent. of all shares or interests in all companies with an asset value in excess of US$0.5 million be held by indigenous Zimbabweans within a 5 year period from 1 March 2010, are confusing and further erode confidence in the policies of the country. The Board continues to believe the mining sector has the ability to play a leading role in the reconstruction of Zimbabwe.

Board Changes

In December 2009, Roy Lander stepped down from the Board and Bryce Fort replaced Navaid Burney as Emerging Capital Partners' board representative. Bryce Fort subsequently stepped down from the Board on 13 April 2010. I would like to take this opportunity, on behalf of the Company, to thank Roy Lander, Navaid Burney and Bryce Fort for their services to CAG and the support they have provided to the Board, particularly during CAG's recent difficulties, and wish them well in their future endeavours.

Annual report

The Annual Report and Accounts will be posted to shareholders shortly.

Appreciation

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

Roy Pitchford

Acting Chairman and Chief Executive

Financial Review

Analysis of results

Turnover from continuing operations in the year was £0.9 million (2008: £0.6 million), generated from the sale of 1,188 (2008: 3,990) ounces of gold following recommencement of production at low levels in mid March 2009.

The production of gold resulted in a loss of £0.4 million. Operations were adversely affected by power outages and breakdowns of aged equipment. The lack of available spares and sufficient quantities of consumables compounded this further.

Administrative expenses for continuing operations totalled £3.6 million (2008: £3.4 million) with the total loss from continuing operations for the year being £6.5 million (2008: £4.4 million). Impairments of the Mali assets from their carrying value to the expected proceeds from the sale resulted in an impairment charge of £2.5 million. Additional impairment charges relating to gold-backed bonds and cash in Zimbabwe contributed a further £0.3 million to the total loss for the year.

The dollarisation of costs in Zimbabwe has contributed to higher fixed costs for the Group.

No share‐based payment charge (2008: £0.76 million) has been reflected in the current year, as the share options have substantially vested.

The loss of £3.1 million (2008: £11.6 million) from discontinued operations includes the US$5.0 million (£3.398 million) guarantee settlement paid to Investec Bank.

Impairments to the carrying value of assets at Bibiani in 2008 totalled £14.45 million.

The Group reported a loss attributable to shareholders for the year of £9.548 million (2008: £26.534 million) or a loss of 1.27p per share (2008: 15.91p).

Convertible loan agreements

The convertible loan agreements in existence at the beginning of the year were partially converted into shares following shareholder approval in April 2009. Following that partial conversion, the Company owed US$3.55 million, plus accrued interest, in new loans to ECP and IAM. Repayment of these loans was scheduled for April 2011, but, as announced on 4 June 2010, this has been deferred to April 2012.

In November 2009, CAG entered into new convertible loan agreements with HBD, ECP and IAM totalling £1.2 million (US$1.25 million). The funds received by the Company under these convertible loan agreements carry interest at 10 per cent. per annum, compounded monthly in arrears with the full amount payable on the maturity date, 29 April 2011. Repayment of these convertible loans has been further deferred to April 2012, as announced on 4 June 2010.

In February 2010, CAG entered into new convertible loan agreements with ECP and HBD totalling US$1.0 million (£0.7 million). The funds received by the Company under these new convertible loan agreements carry interest at 10 per cent. per annum, compounded monthly in arrears, with the full amount payable on the maturity date, 29 April 2011. Repayment of these new convertible loans has been deferred to April 2012, as announced on 4 June 2010.

Malian Assets Disposal

The Company held an 80 per cent. interest in a highly prospective portfolio of properties in Mali.

Given the Company's decision to focus on our Zimbabwean assets, the relatively early stage of development of the Malian assets and the difficulties of effectively managing them from our head office in South Africa, we took the decision to sell these assets.

Accordingly, as announced on 21 December 2009, the Company entered into an agreement to dispose of these assets for a consideration of US$4.0 million (of which US$0.6 million was received prior to the year-end and US$3.4 million received on 15 March 2010). The transaction was completed in March 2010, with a final payment of US$1.0 million due, subject to the definition of a JORC compliant indicated and measured resource of at least 500,000 ounces, being achieved, within a 24 month period commencing on 15 March 2010.

Financial risk management

The Group's activities expose it to a variety of financial risks, including liquidity risk and market risk.

Liquidity risk

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

It is the Group's policy to finance its business by means of externally generated funds supported by the Group's bankers, other lenders and external share capital.

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

The cash and debt resources of the business are limited and, at current levels of cash outflow, would be consumed by the end of November 2010. The consideration of this in the context of going concern is set out in the basis of preparation in note 1 to these financial statements.

Market risk

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

Foreign Exchange risk

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

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

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

Going Concern

For the reasons given below, the Directors consider it appropriate to prepare the financial statements on the going concern basis, notwithstanding the circumstances described below.

The Group sustained a loss in the year to 31 December 2009 of £9.5 million (2008: £26.5 million) and the Group had net current assets of £0.6 million (2008: £20.1 million net current liabilities). The Group's operating assets now consist entirely of five gold mines and extensive claim holdings in Zimbabwe; two of these mines are operating at a low level, but are remain loss making, with the rest being on care and maintenance. The mines require significant development and capital investment in order to become operational and cash generative. While the situation in Zimbabwe remains challenging, the Directors are now cautiously optimistic about the recovery prospects for the mining sector, as a result of the formation of a government of national unity, substitution of the US Dollar for the Zimbabwe Dollar, and the Monetary Policy Statement issued in February 2009.

The Group has limited cash and debt facilities, which will only be sufficient to allow the Group to trade as a going concern, that is, for at least 12 months from the date of approval of these financial statements, if significant cost reductions are achieved. The Group's overall viability is dependent upon it being able to raise new funding in order to enhance the value of the Zimbabwean assets. In terms of strengthening its current liquidity position, the Directors have taken the following actions:

·; Operating costs have been reduced, and which management expects to reduce these even further.

·; Concluded the disposal of its Malian assets, receiving US$3.4 million (£2.3 million) in March 2010. A final instalment of US$1.0 million (£0.6 million) is contingent on reserves determination prior to March 2012. 

·; Deferring repayment of shareholder loans totalling US$4.6 million (£2.9 million) at year end and convertible loan notes totalling US$1.25 million (£0.7 million) at year end, until April 2012.

·; Shareholder loans totalling £0.6 million (US$1.0 million) raised subsequent to year end have been deferred to April 2012. 

Consequently, the Group has no significant debt repayment obligations before April 2012.

At 30 May 2010, the Group's holds £1.2 million cash, which at current spending would be consumed by the end of November 2010. If significant cost savings cannot be achieved, and the Company were to run out of cash, the Company would request further funding from its shareholders. If the support of the shareholders is not forthcoming then the business would have a cash shortfall and would face being wound up.

The Directors are currently seeking financial and other arrangements to take forward the development of the Zimbabwean assets onto a commercial and profitable production basis. As reported in December 2009, the new arrangement may be through a joint arrangement, new equity invested in the Company, exchanging some or all of the Zimbabwean assets for an equity stake in any acquiring company or through outright acquisition of the Company itself. Accordingly, the Directors are of the view that there is a realistic alternative to an outright sale of the assets themselves, and a consequent cessation of trading by the Group. Although discussions with interested parties have advanced since December, there can be no certainty that a suitable arrangement will be effected.

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

12008 comparatives have been presented to show the results of the Ghanaian business segment as discontinued as a result of its divestment in January 2006.

NOTES TO THE FINANCIAL STATEMENTS

For the YEAR ended 31 DECEMBER 2009

1. Basis of preparation

Central African Gold Plc (the "Company") is a company domiciled and incorporated in the United Kingdom. The condensed consolidated annual financial statements of the Company as at and for the year ended 31 December 2009 comprise the Company and its subsidiaries (together referred to as the "Group").

These preliminary financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2009.

The financial information contained in this preliminary report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The comparative figures for the financial year ended 31 December 2008 are not the Group's full statutory accounts for that financial year. The report of the auditors was

(i) qualified based on the limitation of information available to them in respect of one subsidiary, CAG Ghana. While KPMG's work was not limited in respect of the other assets, liabilities, income and expenses of the Group and they were able to obtain sufficient appropriate audit evidence over those amounts, because of the significance of the CAG Ghana balances to the Group as a whole, KPMG have been unable to form a view on the consolidated financial statements;

(ii) drew attention to the going concern assumption by way of emphasis of matter without qualifying their report; and

(iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

These preliminary audited financial statements were approved by the Board of Directors (the "Board") on 7 June 2010.

The consolidated financial statements incorporate those of the Company and its subsidiary undertakings for the period. The current year financial statements to December have been audited and have been prepared using accounting policies and practices consistent with those adopted in the audited financial statements for the year ended 31 December 2008.

The financial statements are presented in pounds sterling, rounded to the nearest thousand. The preparation of financial statements in conformity with adopted International Financial Reporting Standards ("IFRS") requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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

1. Basis of preparation (continued)

For the reasons given below, the Directors consider it appropriate to prepare the financial statements on the going concern basis, notwithstanding the circumstances described below.

The Group sustained a loss in the year to 31 December 2009 of £9.5 million (2008: £26.5 million) and the Group had net current assets of £0.6 million (2008: £20.1 million net current liabilities). The Group's operating assets now consist entirely of five gold mines and extensive claim holdings in Zimbabwe; two of these mines are operating at a low level, but are remain loss making, with the rest being on care and maintenance. The mines require significant development and capital investment in order to become operational and cash generative. While the situation in Zimbabwe remains challenging, the Directors are now cautiously optimistic about the recovery prospects for the mining sector, as a result of the formation of a government of national unity, substitution of the US Dollar for the Zimbabwe Dollar, and the Monetary Policy Statement issued in February 2009.

The Group has limited cash and debt facilities, which will only be sufficient to allow the Group to trade as a going concern, that is, for at least 12 months from the date of approval of these financial statements, if significant cost reductions are achieved. The Group's overall viability is dependent upon it being able to raise new funding in order to enhance the value of the Zimbabwean assets. In terms of strengthening its current liquidity position, the Directors have taken the following actions:

·; Operating costs have been reduced, and which management expects to reduce these even further.

·; Concluded the disposal of its Malian assets, receiving US$3.4 million (£2.3 million) in March 2010. A final instalment of US$1.0 million (£0.6 million) is contingent on reserves determination prior to March 2012. 

·; Deferring repayment of shareholder loans totalling US$4.6 million (£2.9 million) at year end and convertible loan notes totalling US$1.25 million (£0.7 million) at year end, until April 2012.

·; Shareholder loans totalling £0.6 million (US$1.0 million) raised subsequent to year end have been deferred to April 2012. 

Consequently, the Group has no significant debt repayment obligations before April 2012.

At 30 May 2010, the Group's holds £1.2 million cash, which at current spending would be consumed by the end of November 2010. If significant cost savings cannot be achieved, and the Company were to run out of cash, the Company would request further funding from its shareholders. If the support of the shareholders is not forthcoming then the business would have a cash shortfall and would face being wound up.

 The Directors are currently seeking financial and other arrangements to take forward the development of the Zimbabwean assets onto a commercial and profitable production basis. As reported in December 2009, the new arrangement may be through a joint arrangement, new equity invested in the Company, exchanging some or all of the Zimbabwean assets for an equity stake in any acquiring company or through outright acquisition of the Company itself. Accordingly, the Directors are of the view that there is a realistic alternative to an outright sale of the assets themselves, and a consequent cessation of trading by the Group. Although discussions with interested parties have advanced since December, there can be no certainty that a suitable arrangement will be effected.

1. Basis of preparation (continued)

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

 New standards, amendments and interpretations that are relevant to the Group but have not yet been adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the period ended 31 December 2009, and have not been applied in preparing these condensed consolidated financial statements. No new standards are expected to have a significant effect on the financial statements of the Group.

2. Segmental information

2. Segmental information (continued)

2. Segmental information (continued)

3. Basic and diluted loss per share

Basic and diluted loss per share was based on the loss attributable to ordinary equity holders of the Company of £9.548 million (December 2008: £26.684 million) and the weighted average number of ordinary shares outstanding during the period of 752,974,029 (December 2008: 167,666,860).

4. Subsequent events

Loan agreements

The Company has entered into new loan agreements (the "Loan Agreements") with HBD Zim Investments Limited ("HBD") and Emerging Capital Partners ("ECP"), (together, "the Lenders"). The Loan Agreements total circa US$1.0 million (approximately £0.6 million) and amount to US$0.3 million from HBD (approximately £0.2 million), and US$0.7 million from ECP (approximately £0.4 million). All loan amounts used the rate of exchange prevailing on the date of the Loan Agreement. The funds received by the Company under the Loan Agreements carry interest at 10 per cent. per annum, compounded monthly in arrears with the full amount payable on the maturity date, 29 April 2011. There is no penalty for early repayment of the loans.

As announced on 4 June 2010, the maturity date for these loans has been further extended to 29 April 2012.

The US$0.5 million loan facility with a local Zimbabwean bank was extended for a further period of three months on the same terms and conditions. As at the date of the approval of these financial statements, the loan has been settled.

The Reserve Bank of Zimbabwe has extended the repayment date of the gold-backed bond, which was due to mature on 1 February 2010, by a further six months. The facility secured by the gold-backed bond was not renewed but converted to a three month term loan that carries interest at a rate of 3.75 per cent. per month.

 Malian assets disposal

The Company entered into a binding agreement to dispose of its 80 per cent. equity interests in each of Mali Goldfields SARL and Songhoï Resources SA (together the "Malian Assets") (the "Disposal") to Colonial Resources Limited ("Colonial") (the "Agreement") for a total consideration of US$5.0 million (the "Consideration"). As at 31 December 2009, the Malian Assets, which are early stage gold exploration assets, consisting of 18 prospective permits spanning circa 1,883km² of the Birimian strata, were recorded as having a book value of £2.56 million (2008: £3.8 million).

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

Shareholders approved the disposal of the Malian assets at a general meeting on 12 February 2010.

CAG is using the proceeds of the disposal to satisfy its working capital requirements, to meet certain creditor balances that fell due on completion and to develop its Zimbabwean gold assets.

Statutory Instrument 21 of 2010: Indigenisation and Economic Empowerment Regulations

The Government of Zimbabwe promulgated Statutory Instrument 21 of 2010 on 29 January 2010. The statutory instrument requires that 51per cent. of all shares or interests in businesses with an asset value in excess of US$0.5 million be held by indigenous Zimbabweans within five years from 1 March 2010, on which date the instrument became effective.

The Company is proposing to follow the plan created by the Chamber of Mines, where an initial quantum of up to 15 per cent. is made available for purchase by Indigenous Zimbabweans. The balance of the proposed 51 per cent. will be made up by "credits" as defined in the scorecard also as proposed by the Chamber of Mines and will be achieved from efforts directed primarily at empowerment. This score card takes into account the corporate responsibility initiatives by the Company.

The Company is investigating further additional components that make up the score card including support of local industry. A review of the claims portfolio has also been initiated. The company intends to expand upon the Skills Training School already open at Venice Mine.

Employee share schemes that currently exist will be revised during the year.

5. Contingent liabilities

There were no contingent liabilities at 31 December 2009 required to be disclosed in the Group's financial statements.

6. Approval of accounts

These preliminary annual financial statements were approved by the Directors on 7 June 2010.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Board confirms that to the best of their knowledge and belief:

·; the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·; the Directors' report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board

Roy Pitchford Craig Campbell

Acting Chairman and Chief Executive Chief Financial Officer

* * ENDS * *

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