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CRD - Central Rand Gold Limited - Operational and strategic review and

Release Date: 29/03/2011 10:10
Code(s): CRD
Wrap Text

CRD - Central Rand Gold Limited - Operational and strategic review and commencement of offer period suspension of underground mining operations Central Rand Gold Limited ("CRG" or the "Company" or the "Group") (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 OPERATIONAL AND STRATEGIC REVIEW AND COMMENCEMENT OF OFFER PERIOD SUSPENSION OF UNDERGROUND MINING OPERATIONS Acid Mine Drainage ("AMD") On 7 February 2011 Central Rand Gold Limited announced certain cash conservation measures pending confirmation from the South African Government of its commitment and financial participation to the AMD projects in the Witwatersrand mining basins. The Company further advised that, "Shareholders should be in no doubt that if a clear and positive way forward is not identified by end of March 2011 the prospects of the Company will need to be evaluated." The Company has now reviewed the Report to the Inter-Ministerial Committee published on 24 February 2011 by the Department of Water Affairs of the South African Government and has attended two meetings with the South African Government in pursuit of further clarity. The Company has now evaluated its prospects in terms of the perceived AMD risks and its short-term production situation and concludes as follows: - Whilst the publication by the South African Government of the AMD Report and review thereof in subsequent meetings with Government have been very welcome in that they have crossed the first hurdle of a commitment towards resolution of this major environmental issue; however, there remains insufficient clarity on key issues such as targeted minimum water levels, project engineering and technology, the role and responsibilities of the interested parties, cost allocation between interested and affected parties and timing to meet the degree of definition needed by the Company to continue development and mining at the present rate. - The submersible pumps, ordered and paid for by the Company at a cost of Euro3.5 million , and due for delivery in August 2011 have a capacity to pump 72 million litres of water per day compared to the average daily ingress of 55 million litres. Should it be decided to utilise these pumps and the engineering already completed for the ERPM South West Vertical shaft dewatering station these pumps have the capability to dewater the Central Rand Basin and restore CRG`s Reserves. In the event that these pumps are not utilized for this purpose the Company will sell them - The need to have this (or some alternative equivalent) capacity installed by December 2011 in order to protect the 250 metre below surface (mbs) level and enable gradual de-watering thereafter, and the timelines inherent in the Western Utility Corporation`s technical proposals informed the previously published need for definition by the end of March 2011. There is much to be done to close the gap between the general commitments of the Government and the Company`s specific needs. Whilst there is no doubt that this will all be resolved, everything hangs on the timing, which is disappointingly uncertain. In the face of these uncertainties concerning depth, the obvious alternative is to maximise development and mining in the upper levels. Underground Mining Mine Development Underground development has averaged 470 metres per month, in the process confirming the practicality of the new footwall development programme together with the re-designed long-hole stoping and support patterns. In developing ahead of the next planned stopes, between 120mbs to 180mbs, some 30% of the stopes accessed in the current mining area have been found to have unexpected "double-voids", i.e. not only has the original Main Reef Leader been extracted but also the Main Reef which was not indicated on the historical mining plans. Mine planning, based on the trial-mining programme of early 2009, included only for the loss, for value and "void" reasons, of some 10% of the ground. This has the effect of slowing down the rate of access to mineable stopes, consequently increasing the cost of development per ton of accessible ore, and, most significantly in the short-term, dramatically reducing immediate revenue projections. This has unsustainable consequences for the Company`s cash reserves. Evidence from development on lower levels suggest that the "double-void" phenomenon decreases with depth, leading to the interpretation that these voids are a result of unmapped remnant mining on retreat by the previous mining operations. In the face of these "voids" at shallow levels standard mining practice would be to go deeper, however, as a result of the rising water table, this is not an option available to the Company in the interim. Mining Grade A third-party process aimed at confirming and verifying the planned mining grades for the immediate mining area was undertaken during March 2011. Current underground development sampling, surface diamond drilling results and surface trench sampling results were incorporated into the existing historical database. The updated database was then re-evaluated by Dr Carina Lemmer. This process resulted in the verification of the original Resource figures and validated the in-situ grades incorporated in the mine plan. Mine Production The first two footwall-accessed stopes were mined in March 2011, producing approximately 2.300 tonnes of ore at an in-situ grade of 3.4g/t. Comparison to a "built-up" head grade, back calculated from in-plant and tails sampling, indicates a current Mine Call Factor of approximately 65%, compared to budgeted values of around 75%. Since the Main Reef is breaking cleanly on the footwall the only conclusion is that a considerable proportion of vintage hanging wall (over and above the planned-for "middling") is diluting the mined ore. A programme to refine the blasting and ore-handling techniques, including trial testing of "split-firing" of middlings plus old hanging from reef is the next stage. The "empty tons" associated with this dilution severely impact the cost per ounce of gold produced and the short-term cash flows while this gap between planned and actual is being closed. The optical ore sorter, commissioned in February 2011, will continue to be optimised to increase removal of waste dilution without sacrificing gold recovery. Interim Business Plan Pending meaningful definition of the engineering, costing and timing issues surrounding the AMD project it is not prudent to continue with down-dip development. Pending clearer definition of the impact of "double-voids" on short-term reserves it is not affordable to continue development on the upper levels. The major focus of the mining in the next 3- 4 month period will be further investigation of viable methods to reduce dilution in the currently available stopes. The implications of the above on the Company`s short term business plan can be summarised as follows: - Underground capital development operations will be suspended effective 30 April 2011 after opening up the next stoping level which appears to have minable reef with fewer "double-voids". - The currently available stopes will be mined out, thereby generating near term cashflow. This is expected to yield 30,000 tons of reef at an in-situ (Main Reef plus Middling) grade of 3.14 g/t. This programme, which will take three months, will also be utilised to develop and refine blasting and waste separation techniques. - A study into the feasibility of selectively mining appropriate areas by conventional handheld in-stope drilling in order to reduce dilution and improve grade selectivity as an additional methodology is currently underway. - To the extent affordable, a programme of surface and underground drilling to verify the presence of Main Reef (i.e. to define the "double-void" issue) in near-term mining reserves will be undertaken - Except for underground exploration work, underground operations will be placed on a "care and maintenance" basis following extraction of the the immediately available stopes. - Surface mining of currently defined SAMREC and JORC Exploration Target Material (between 63 000 tonnes and 76,000 tonnes at an expected head grade of approximately 3.2g/t) will continue until exhausted; this is expected to occur around September 2011. - The commercial viability of treating all existing ore through a third-party toll treating agreement will be reviewed. - A financial feasibility study of processing high grade tailings will be completed. - In the interim CRG`s metallurgical operations will continue to process all surface and underground ore. If a decision is made to toll treat, or if all stock piles have been depleted, the metallurgical plant will be cleaned out to recover all in-process stock. - The Company will commence a process of reducing its staff complement to ensure alignment with the above business plan. The Company currently has cash and near cash resources in the approximate amount of US$10million and is thus expected to have sufficient cash resources to meet all outstanding commitments until mid-2012. Strategic Review The Company`s very substantial gold resource base remains intact and in part has recently been reconfirmed. Work to demonstrate economically viable extraction has progressively eliminated certain approaches and has highlighted the keys to success - which future planning intends to deliver. A combination of this focus, plus much clearer direction from Government on dealing with AMD pumping and treatment, together with the consequent ability to physically access the relatively "double-void" free deeper levels, should allow the Company to show its real value. Given resolution and progress on the above-listed uncertainties, the Company expects to be able to re-assess its prospects by end of October 2011. Part of this re-assessment will be the questions of further funding and possible other corporate actions. In the interim, given the continued difficulties and uncertainties faced by the Company, the Board continues to look at all strategic options for the Company one of which could lead to an offer for the entire issued share capital of the Company. However, this option is at an early stage and there can be no certainty that an offer for the Company will be forthcoming. Note: The potential quantity and grade described by the term "Exploration Target" is conceptual in nature and there has been insufficient exploration to define a Mineral Resource and it is uncertain if further exploration will result in the definition of a Resource. Further exploration work is ongoing and includes trial mining and processing of this shallow target to establish grade and orebody continuity, mineability, dilution and throughput characteristics For further information, please contact: Johan du Toit +27 (0) 11 674 2304 Patrick Malaza +27 (0) 11 674 2304 Enquiries: Evolution Securities Limited +44 (0) 20 7071 4300 Chris Sim / Neil Elliot Macquarie First South Advisers (Pty) Ltd +27 (0) 11 583 2000 Annerie Britz / Melanie de Nysschen/ Yvette Labuschagne Buchanan Communications Limited +44 (0) 20 7466 5000 Bobby Morse / Katharine Sutton / James Strong Disclosure requirements of the Takeover Code (the "Code") Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person`s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person`s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3. Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4). Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel`s website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel`s Market Surveillance Unit on +44 (0)20 7638 0129. Date: 29/03/2011 10:10:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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