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CRD - Central Rand Gold Limited - Placing and operational update
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 2007/019223/10)
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 GBP3.7
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) 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
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
GBP3.7 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:
Director/Senior Position Current Placing Shareholding % of
Manager Shareholding* Shares at Admission Enlarged
subscribed Issued
for Share
Capital
Alastair Walton Chairman 4,600,000 460,000 5,060,000 1.86
Michael McMahon Non- 200,000 20,000 220,000 0.08
executive
director
Johan du Toit Chief - 100,000 100,000 0.04
Executive
Officer
Miklos Salamon Non- 950,000 95,000 1,045,000 0.38
executive
director
Nick Farr-Jones Non- 300,000 30,000 330,000 0.12
executive
director
Robert Kirkby Non- 1,050,000 105,000 1,155,000 0.43
executive
director
Donovan Harper Head of - 100,000 100,000 0.04
Mining
* 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
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 2010 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 ("CRG
SA") 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 Officer 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
CRG SA.
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 Limited (1994-1995), an international shipping and
freight forwarding company, Engen Petroleum Limited (1995-2001), a major
downstream oil and petroleum products company, and most recently at Transnet
Freight Rail, the South African state freight distributor (2001-2009) 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 TSB01 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 per cent. 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 per cent.
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 per cent. 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 per cent.), 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 to 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.
Black Economic Empowerment update
The ongoing dispute between the Company and its Black Economic Empowerment
partner Puno Gold Investments (Pty) Limited regarding the operational funding
for CRG SA 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 million to US$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 CRG SA 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.
QUOTE
"Memorandum Snowden
To: Johan du Toit
Company: Central Rand Gold
From: Allan Earl
Date: 14 January 2010
Project: CRG Trial Mining
Subject: Impact of revised modifying factors
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."
UNQUOTE
22 January 2010
Johannesburg
Sponsor
Macquarie First South Advisers (Pty) Ltd
Date: 22/01/2010 09:00:29 Supplied by www.sharenet.co.za
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