Wrap Text
CRG - Central Rand Gold Limited - 2011 Interim Report
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
2011 Interim Report
Central Rand Gold, the South African gold mining and exploration holding
company, today announces its Interim Results for the six months ended 30 June
2011. The full set of results is available on the Company`s website:
www.centralrandgold.com
For further information, please contact:
CRG +27 (0) 11 674 2304
Johan du Toit / Patrick Malaza
Evolution Securities Limited +44 (0) 20 7071 4300
Chris Sim / Neil Elliot
Merchantec Capital +27 (0) 11 325 6363
Roger Pitt / Monique Martinez
Buchanan Communications Limited +44 (0) 20 7466 5000
Bobby Morse / Katharine Sutton / James Strong
Jenni Newman Public Relations (Pty) Ltd +27 (0) 11 772 1033
Jenni Newman
26 August 2011
Johannesburg
JSE Sponsor
Merchantec Capital
Chief Executive Officer`s Review
Salient features of this report
- Suspension of underground mining development due to continuing Acid Mine
Drainage ("AMD") uncertainty and discovery of "composite voids" in the
initial shallow areas.
- Surface mining to continue until the end of September 2011.
- Gold production up 133% to 7,189 ounces.
- Trial conventional mining exercise underway.
- Draft water solution awaiting final Government approval.
- The implementation of a retrenchment programme to reduce staff numbers by
160 in line with reduced mining activity.
- Cash and near cash resources at 30 June 2011 of US$4.8 million.
Overview
The first half of 2011, being the period under review, turned out to be a
watershed period for Central Rand Gold.
The continuing AMD in the Central Basin has become a major risk factor and an
operational impediment for the Company, prompting the decision to indefinitely
suspend underground mining operations with effect from 25 May 2011.
As a result of the uncertainty facing the Company, the size of the workforce has
had to be substantially reduced, thus prompting the implementation of a
retrenchment programme with effect from 15 July 2011. As a result of this
programme, which adheres to relevant labour law policies and procedures, about
159 staff members, of the current total head count of 218, will leave the
Company`s employment between July and September 2011.
Although July 2011 was indeed a sad moment in the Company`s history to have to
say goodbye to valuable staff members, the retrenchments were necessary in light
of the Company`s need to preserve capital while assessing its options regarding
the future.
During the third quarter of 2011, the Company will continue to review all
operations and activities to accurately assess its future strategic options.
Water
On 29 March 2011, the Company reported that some progress and commitment had
been made by the South African Government towards addressing the AMD situation
(including the allocation by the National Treasury of R225 million (US$32
million) to the Department of Water Affairs to finance a solution).
Nevertheless, with the water table gradually rising towards the 250 metres below
surface ("mbs") level, the Board of Directors of CRG ("the Board") deemed it
prudent to discontinue underground mine development, at least until action has
been taken to resolve the problem. If the water is stopped at 250 mbs,
approximately 90% of the Company`s resource base will be under water. The water
level as at the end of July 2011 was measured at 425 mbs at South West Vertical,
rising at approximately 0.3 metres per day.
On 29 March 2011, the Company also announced that the submersible pumps ordered
by the Company at a cost of Euro3.5 million (R34.4 million or US$5.0 million)
would be capable of pumping approximately 72 million litres of water per day,
more than the expected water ingress of around 55 million litres per day. As
part of a quality control plan, the two pumps were individually tested on 20
July and 22 July 2011, respectively, in a special testing bay at the
manufacturer`s factory in Schwabisch Gmund in Germany, to ensure conformance to
specifications. Representatives from Central Rand Gold as well as the Trans-
Caledon Tunnel Authority ("TCTA") (the appointed project managers by the
Department of Water Affairs) and BKS (consultant to TCTA) were present. In the
event that these pumps are not utilised for the intended purpose, they will be
sold.
The Board believes CRG has done as much as it possibly can to contribute towards
finding a workable solution to the AMD problem, and continues to participate in
industry lobbying which has included making presentations to a parliamentary
subcommittee in Cape Town. Additional feedback from the Department of Water
Affairs is still being awaited.
TCTA has been tasked with project management of the AMD situation and the
implementation of a solution that will benefit the mining industry and other
stakeholders in the Central Basin area. At the time that this report was being
written, TCTA had presented to the Company a draft proposal on the
implementation of a workable and sustainable solution. However, this proposal
still requires Governmental approval.
Geology
Resources and Reserves
During the period under review, the Company discovered that approximately 30% of
its proposed stoping area, between 120 and 180 mbs, consisted of composite
double voids. Composite double voids represent areas where the Main Reef Leader,
middling and the Main Reef have been historically extracted as a single unit.
A statistical analysis study on the occurrence and distribution of composite
double voids is underway, and it appears that the prediction of both the
location and the frequency of these areas of previous mining activity is
possible. The existence of the composite double voids do not appear to be a
pervasive situation and is thought only to occur where the middling is
relatively thin and mineralised, and the gold grade of total composite package
is sufficiently high. The impact of the composite double voids on the resource
and reserves is expected to be localised and relatively minor.
Once the aforementioned study has been completed, a full analysis thereof will
be incorporated into the Company`s Resource model and a comprehensive update of
the Main Reef Resource base is envisaged. A future review and rework of the Main
Reef Reserves to incorporate potential conventional mining currently being
tested, is also anticipated to take this statistical model into account.
Mineral Reserve Summary (End June 2011)
Probable Reserves
Area Tonnes Grade Oz
Central MR 1.94 4.1 253,000
West MR 1.79 4.1 229,000
Total 3.73 4.1 482,000
Mineral Resource Summary (End June 2011)
Indicated Resource Inferred Resource
Area Tonnage Grade Metal Tonnage Grade Metal
(Mt) (g/t) (Moz) (Mt) (g/t) (Moz)
CMR <900m MR and MRL 10.5 1.6
5.47 1.84 9.51 0.48
Crown <900m MR and MRL 5.8 3.1
5.93 1.10 8.05 0.81
V&R <900m MR and MRL 1.8 0.2
6.67 0.39 16.50 0.11
CD <900m MR and MRL 2.9 2.5
6.81 0.63 6.76 0.54
SJ <900m MRL 1.5 0.2
8.80 0.43 8.27 0.04
CMR Kimberley Reef <900m 2.6 0.6
3.70 0.31 3.78 0.07
CMR White Reef <900m 3.6 3.4
3.81 0.44 3.89 0.42
MR and MRL > 900m and 58.5 46.6
other sources 9.69 18.22 7.27 10.89
Total 87.2 58.2
8.33 23.36 7.15 13.36
Surface Exploration Target Summary (End June 2011)
Mining Area Reef Exploration target material
Central MR&MRL 2.8-3.4 g/t 6,900 - 8,300 t
New Unified MR&MRL 4.4-5.3 g/t 6,800 - 8,200 t
New Unified MR&MRL 3.6-4.4 g/t 21,800 - 26,200 t
West
Spenser New MR&MRL 3.6-4.3 g/t 15,900 - 19,100 t
Slot 5 A White 2.9-3.1 g/t 27,000 - 48,000 t
Slot 5 B,C,D White 1.5-1.9 g/t 17,000 - 33,000 t
Slot 7 White 2.1-3.2 g/t 87,000 - 200,000 t
Resources are quoted inclusive of Reserves.
Note: Reserves have not yet been depleted as a result of mining operations, as
almost all mining to date has taken place above 70 mbs, that being limited to
surface mining which was not part of the quoted Reserve. The limited underground
mining that has taken place to date is not significant enough to warrant the
restatement of figures. Unplanned composite double voids will be incorporated
into future Resource and Reserve estimates once their full extent is understood.
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. It is uncertain if further exploration will result in the
definition of a Resource. Further exploration work, which includes trial mining
and processing of this shallow target to establish grade and orebody continuity,
mineability, dilution and throughput characteristics, is ongoing.
Underground mining
As a result of the AMD and the occurrence of composite double voids - and with a
view to conserving cash reserves - the Company suspended underground mining
development operations with effect from 25 May 2011, at 205 mbs. The Company
continued with underground long-hole stoping operations until the end of June
2011.
Mining production - Underground
Month Stope reef Grade Development reef Grade*
tonnes (g/t) tonnes (g/t)
January 3,360 1.9 2,952 1.6
February 3,432 2.8 9,072 1.6
March 10,080 2.0 6,120 1.6
April 9,287 2.5 3,337 1.6
May 4,125 3.6 1,725 1.6
June 9,402 1.9 773 1.6
Total 39,686 2.4 23,979 1.6
* Development grades are based on block estimates.
Dilution and grade control
Dilution from delaminated hanging wall waste, resulting from the use of long-
hole stoping, has continued to be a problem with up to two metres of barren
quartzite diluting the targeted Main Reef ore. This has had the overall effect
of reducing the head-grade, and in some instances to below 1.9 g/t, which has a
significant negative impact on project economics. To address the problem, a
surface waste sorting programme has been implemented involving both hand sorting
and the use of the Commodas Optical Sorter, in an attempt to remove dilutive
material from the underground ore stockpiles.
Planned Mining Grade Actual Mining Grade
January 2.8 g/t 1.9 g/t
February 3.4 g/t 2.8 g/t
March 3.3 g/t 2.0 g/t
April 3.5 g/t 2.5 g/t
May 6.1 g/t 3.6 g/t
June 3.5 g/t 1.9 g/t
The impact of this dilution has necessitated the suspension of long-hole stoping
as the primary mining method and it is believed that conventional mining trials,
currently being tested, will allow for better on-face grade control, selectivity
and a dramatic reduction in hanging-wall dilution.
Surface mining
Importantly, in comparison to 2010, more surface tonnes have been mined at a
slightly higher grade than expected.
There has also been a slight increase in the stripping ratio as a result of
deepening pits. At the end of June 2011, three pits were active - New Unified
Pit, Spencer Pit and Central Pit - all of which are expected to be exhausted by
the end of September 2011 at a planned output rate of 15,000 reef tonnes per
month.
Mining production - Surface
Month Surface Reef tonnes Strip ratio
January 14,193
8.4
February 16,773
11.0
March 20,446
7.0
April 20,305
7.0
May 17,098
9.0
June 23,514
9.0
Total 112,329
8.0
Mining area Reef tonnes g/t
New Unified Pit 61,868 4.08
Central Pit 40,128 3.39
Spencer 10,333 3.86
Total 112,329 3.81
Metallurgy
During the period under review, the Bateman concentrator processed 37,479 tonnes
of Main Reef ore at an average feed grade of 2.05 g/t. The feed material was
largely made up of friable surface oxides mixed with a smaller proportion of
hard siliceous underground sulphide ore. Bateman floatation recovery for the
period improved substantially from approximately 63%, to approximately 77%,
generating 6,590 tonnes of concentrate running at 8.9 g/t. Bateman plant
availability dropped from 70% to 60%, largely due to a significantly higher
proportion of harder sulphide feed.
The Carbon-in-Pulp ("CIP") plant performance also improved markedly during the
period under review with 61,109 tonnes of surface oxide ore, running at an
average grade of 2.74 g/t, being fed directly to the CIP plant. This was
supplemented by the addition of the 6,590 tonnes of Bateman concentrate. Gold
recovery improved from 86% to approximately 90% and the CIP availability
increased from 86% to 90% during the period under review.
In March and April 2011, approximately 12,000 tonnes of oxide ore, at an average
grade of 2.6 g/t, was dispatched to Mintails, the neighbouring gold processing
company, with a view to testing the economics of toll treatment of surplus ore
in excess of current processing capacity. The exercise was profitable and
demonstrated the economic merit of pursuing this arrangement when surplus ore
production occurs.
In June 2011, a further toll treatment exercise was initiated to investigate the
merits of treating high grade residue tailings generated during the initial
commissioning phase of the Gekko concentrating plant. By 30 June 2011,
approximately 19,159 tonnes, at an average grade of 1.39 g/t, had been
dispatched to Mintails for processing.
Gold production for the first half of 2011 was 7,189 ounces, an increase of 133%
from the comparable period in 2010.
Keith Matier, Head of Geology, took over responsibility for the Company`s
metallurgical processing operations from Riccardo Tonini, who resigned from the
Company at the end of May 2011.
Trial conventional mining
An important new development for CRG is the trialing of conventional mining
until the end of September 2011. The mining contractor, Sekgwa Mining Services
(Proprietary) Limited, has been engaged to undertake conventional trial mining
in the Company`s current mining area to verify whether or not conventional hand-
held, in-stope drilling can be undertaken safely, economically and without major
dilution. Improvement of grade selectivity will also be a factor in this trial
mining exercise.
The expectation is that the minimisation of blasting vibrations under the
conventional mining method will reduce blasting-induced falls of ground and
therefore minimise dilution. The other expectation is that shorter rounds of
drilling will make mining more flexible to introduce resue mining where the
middling is of significant enough width to be blasted separately.
Broad-based black economic empowerment
Central Rand Gold remains in dispute with its broad-based black economic
empowerment partner, Puno Gold Investments (Proprietary) Ltd. The matter is
currently pending the commencement of arbitration and it is hoped that a
resolution will be reached in the near future.
DMR review
Based on its resource base, Central Rand Gold made certain Social and Labour
Plan ("SLP") commitments in its original New Order Mining Right application.
Between 2009 and the end of 2010, the Company invested R18 million (US$2.6
million) in community related projects and initiatives to the benefit of
community members.
It is anticipated that if the water table is stopped at 250 mbs, approximately
90% of the resource base included in its mining right will be under water. This
resource can therefore only be accessed, once a de-watering programme has
commenced. A request has been made to the DMR to review the Company`s current
and future SLP commitments, so that it reflects the operational reality of a
reduced short-term resource base more closely.
Financial review
Operating loss for the period under review decreased by 17% to US$14.4 million
(30 June 2010: US$17.4 million). This decrease is mainly attributed to:
- Revenue from the sale of 7,189 ounces of gold (June 2010: 3,085 ounces)
processed from shallow surface materials.
- Proceeds from the sale of the Gekko 50 tonne per hour processing plant of
US$5 million.
- Provision for retrenchment of 160 support and operational staff (June 2010:
46 head count).
Net attributable loss for the period under review decreased by 14.6% to US$14.8
million (30 June 2010: US$17.3 million) after taking into account the lower
interest received, transactional foreign exchange losses on the back of a
stronger Rand/US$ exchange rate and lower cash balances.
At the end of June 2011, the net cash position of the Company was reported at
approximately US$4.8 million (30 June 2010: US$4 million) and at the end of July
2011 the balance amounted to US$4.0 million.
Major cash flows during the period under review are set out in the abridged cash
flow below:
2011 2010
US$`(million) US$`(million)
Cash and cash equivalents at 1 January 14.6 15.9
Cash used in operations (11.6) (13.7)
Interest received 0.2 0.3
Mine property, plant and equipment (2.4) (7.8)
Proceeds from sale of assets 5.0 -
Security deposits - Redemption - 0.5
Proceeds from share issue - 6.0
Effects of exchange rate movement on (1.0) 2.8
cash balances
Cash and cash equivalents at 30 June 4.8 4.0
Conclusion
Without doubt, the second half of 2011 will be a critical period in determining
the future of Central Rand Gold. Future prospects are dependent on how the
Company resolves the following three major uncertainties:
1. Stopping the rising water table.
2. Getting a better understanding and confirmation of the ability to predict
the occurrence of composite double voids.
3. Confirmation of the viability of conventional mining.
Given resolution and progress on the above-listed uncertainties, the Company
expects to be able to reassess its prospects by the end of October 2011. As
reported in the 2010 Annual Report, part of this reassessment will be the
question of further funding and the possibility of other corporate actions
taking place. In the meantime, the Company`s remaining staff will do their
utmost to maximise productivity from nearby surface deposits and opened
underground stopes, testing the conventional mining option and keeping
operations as efficient, safe and cost effective as possible.
Johan du Toit
Chief Executive Officer
The information in this statement relating to Mineral Resources and geology has
been reviewed and approved by Mr Keith Matier, BSc (Hons), G D E, Pr Sci Nat,
who is a Competent Person in terms of the SAMREC and JORC codes. Mr Matier is
Geology Manager of CRGSA and has over 17 years` experience in exploration,
mineral resource management and mineral evaluation.
Condensed Group Statement of Financial Position as at 30 June 2011
30 June 31 December 30 June
2011 2010 2010
Notes US$ `000 US$ `000 US$ `000
(Unaudited (Audited) (Unaudited)
)
ASSETS
NON-CURRENT ASSETS
Property, plant and 5 9,140 10,022 31,339
equipment
Intangible assets - - 1,282
Security deposits and 6,332 6,498 5,641
guarantees
Loans receivable 7 10,073 9,830 8,065
25,545 26,350 46,327
CURRENT ASSETS
Security deposits and 3,630 4,069 185
guarantees
Prepayments and other 5,752 6,626 4,446
receivables
Inventories 8 1,087 207 1,205
Cash and cash equivalents 4,803 14,624 3,945
Non-current assets held- 6 595 4,074 8,780
for-sale
15,867 29,600 18,561
TOTAL ASSETS 41,412 55,950 64,888
EQUITY
Attributable to equity
holders of the parent
Share capital 9 25,604 25,604 5,424
Share premium 9 213,377 213,377 197,017
Share-based compensation 28,262 27,925 28,296
reserve
Treasury shares (6) (6) (6)
Foreign currency (26,690) (26,955) (31,645)
translation reserve
Accumulated losses (225,708) (210,897) (156,174)
14,839 29,048 42,912
Non-controlling interest - - -
TOTAL EQUITY 14,839 29,048 42,912
LIABILITIES
NON-CURRENT LIABILITIES
Environmental 10 6,291 6,474 1,460
rehabilitation and other
provisions
Loan payable 10,073 9,830 8,065
Operating lease liability - 4 -
Borrowings - - 1
16,364 16,308 9,526
CURRENT LIABILITIES
Trade and other payables 7,596 8,884 8,155
Environmental 10 851 - 2,805
rehabilitation and other
provisions
Taxation payable 1,756 1,704 1,461
Operating lease liability 6 - 4
Borrowings - 6 25
10,209 10,594 12,450
TOTAL LIABILITES 26,573 26,902 21,976
TOTAL EQUITY AND 41,412 55,950 64,888
LIABILITIES
Condensed Group Income Statement for the six months ended 30 June 2011
Six months 12 months Six months
ended ended ended
30 June 31 December 30 June
2011 2010 2010
US$ `000 US$ `000 US$ `000
Note (Unaudited) (Audited) (Unaudited)
s
Other income and gains 11 10,950 11,657 3,934
Employee benefits (6,509) (10,875) (5,546)
expense
Directors` emoluments 12 (537) (1,237) (534)
Depreciation and (1,816) (2,524) (1,445)
amortisation
Inventory write-down (17) (263) (420)
Reversal of 489 (44,455) -
impairment/(impairment)
of assets
Operating lease expense (313) (1,045) (310)
Surface mining costs 13 (12,945) (17,099) -
Operational expenses (955) (718) -
Exploration expenditure - - (9,079)
Other expenses (2,743) (6,554) (3,971)
Operating loss (14,396) (73,113) (17,371)
Interest receivable 784 1,512 772
Finance costs (527) (1,015) (500)
Foreign exchange (672) 1,384 367
transaction
(losses)/gains
Loss before income tax (14,811) (71,232) (16,732)
Income tax expense 14 - (840) (617)
Loss for the period (14,811) (72,072) (17,349)
Loss is attributable
to:
Non-controlling - - -
interest
Equity holders of the (14,811) (72,072) (17,349)
parent
(14,811) (72,072) (17,349)
Shares in issue 1,599,682,99 1,599,682,990 271,611,610
0
Weighted average number 1,599,682,99 1,599,682,990 268,746,797
of ordinary shares in 0
issue
Fully diluted weighted 1,599,682,99 1,599,682,990 268,746,797
average number of 0
ordinary shares in
issue
Basic loss per share (0.93) (4.51) (6.46)
(cents)
Headline loss per share (0.99) (1.83) (5.46)
(cents)
Diluted loss per share (0.93) (4.51) (6.46)
(cents)
Diluted headline loss (0.99) (1.83) (5.46)
per share (cents)
Reconciliation between
loss attributable to
the equity holders of
the Group and the
headline loss
attributable to the
equity holders of the
Group:
Loss attributable to (14,811) (72,072) (17,349)
equity holders of the
Group
Provision for - - 616
restructuring
Loss on measurement of - 5,559 2,159
non-current assets held
for sale to fair value,
less costs to sell
(Profit)/loss on (458) 24 (98)
disposal of property,
plant and equipment
(Reversal)/loss on (489) 37,214 -
measurement of assets
to recoverable amount
Headline loss (15,758) (29,275) (14,672)
attributable to equity
holders of the Group
Condensed Group Statement of Comprehensive Income for the six months
ended 30 June 2011
Six months 12 months Six months
ended ended ended
30 June 31 December 30 June
2011 2010 2010
US$ `000 US$ `000 US$ `000
(Unaudited) (Audited) (Unaudited
)
Loss for the period (14,811) (72,072) (17,349)
Other comprehensive
income:
Exchange differences on 265 1,445 (3,245)
translating foreign
operations
Income tax relating to - - -
components of other
comprehensive income
Other comprehensive 265 1,445 (3,245)
income for the period,
net of tax
Total comprehensive (14,546) (70,627) (20,594)
income for the period
Total comprehensive
income is attributable
to:
Non-controlling interest - - -
Equity holders of the (14,546) (70,627) (20,594)
parent
(14,546) (70,627) (20,594)
Condensed Group Statement of Changes in Equity for the period ended 30
June 2011
Attributable to equity holders of the Group
Note Ordinar Share Share-based Treasury Foreign
s y share premium compensatio shares currency
capital n reserve translatio
n
reserve
US$ US$ US$ `000 US$ US$ `000
`000 `000 `000
Balance at 31 5,023 27,482 (2) (28,400)
December 2009 191,406
Total
comprehensive
income for
the period
ended 30 June
2010
Loss for the - - - - -
period
Other
comprehensive
income
Foreign - - - - (3,245)
currency
adjustments
Transactions
with owners,
recorded
directly in
equity
Issue of
Shares:
Capital 401 5,611 - - -
raising
Employee
Share Option
Scheme:
Share-based - - 814 (4) -
payments:
Employees`
and
Directors`
shares
Balance at 30 5,424 28,296 (6) (31,645)
June 2010 197,017
Balance at 31 27,925 (6) (26,955)
December 2010 25,604 213,377
Total
comprehensive
income for
the period
ended 30 June
2011
Loss for the - - - - -
period
Other
comprehensive
income
Foreign - - - - 265
currency
adjustments
Transactions
with owners,
recorded
directly in
equity
Employee
Share Option
Scheme:
Share-based 17 - - 337 - -
payments:
Employees`
and
Directors`
shares
Balance at 30 28,262 (6) (26,690)
June 2011 25,604 213,377
Condensed Group Statement of Changes in Equity for the period ended 30
June 2011 (continued)
Attributable to equity holders of the Group
Note Accumulate Total Non-controlling Total
s d interest equity
losses
US$ `000 US$ US$ `000 US$ `000
`000
Balance at 31 56,684 - 56,684
December 2009 (138,825)
Total
comprehensive
income for the
period ended 30
June 2010
Loss for the (17,349) -
period (17,349) (17,349)
Other
comprehensive
income
Foreign currency - - (3,245)
adjustments (3,245)
Transactions
with owners,
recorded
directly in
equity
Issue of Shares:
Capital raising - 6,012 - 6,012
Employee Share
Option Scheme:
Share-based - 810 - 810
payments:
Employees` and
Directors`
shares
Balance at 30 42,912 - 42,912
June 2010 (156,174)
Balance at 31 29,048 - 29,048
December 2010 (210,897)
Total
comprehensive
income for the
period ended 30
June 2011
Loss for the (14,811) (14,811) - (14,811)
period
Other
comprehensive
income
Foreign currency - 265 - 265
adjustments
Transactions
with owners,
recorded
directly in
equity
Employee Share
Option Scheme:
Share-based 17 - 337 - 337
payments:
Employees` and
Directors`
shares
Balance at 30 (225,708) 14,839 - 14,839
June 2011
Condensed Group Cash Flow Statement for the six months ended 30 June
2011
Six months 12 months Six months
ended ended ended
30 June 31 30 June
December
2011 2010 2010
US$ `000 US$ `000 US$ `000
(Unaudited) (Audited) (Unaudited)
CASH FLOWS FROM OPERATING Notes
ACTIVITIES
Loss before tax (14,811) (71,232) (16,732)
Adjusted for:
Depreciation and 1,816 2,524 1,445
amortisation
Bad debts written off - 11 -
Employment benefit 336 443 265
expenditure (share-based
payments)
(Profit)/loss on disposal (458) 24 (98)
and scrapping of property,
plant and equipment
Impairment of inventory 17 578 420
(Reversal of (489) 44,455 2,202
impairment)/impairment of
assets
Net loss/(gain) on foreign 672 (1,384) (367)
exchange
Increase/(decrease) in 3 (47) (48)
operating lease liability
Sundry income (16) (36) (6)
Interest received (784) (1,512) (772)
Finance costs 527 1,015 500
Changes in working capital
Decrease/(increase) in 873 (1,354) (826)
prepayments and other
receivables
(Increase)/decrease in (880) 1,367 (2,185)
inventory
(Decrease)/increase in (1,288) 1,264 535
trade and other payables
Increase in provisions 668 3,461 1,963
Cash flows used in (13,814) (20,423) (13,704)
operations
Interest received 258 513 283
Finance costs (1) (16) (12)
Sundry income - - 6
Net cash used in operating (13,557) (19,926) (13,427)
activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property, 5 (2,128) (20,595) (8,263)
plant and equipment
Proceeds from disposal of 6 5,043 471 445
property, plant and
equipment
Net cash from/(used) in 2,915 (20,124) (7,818)
investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayments of borrowings (6) (33) (13)
Decrease/(increase) in 605 (4,251) 490
security deposits
Net proceeds from issue of 9 - 42,552 5,985
share capital
Net cash from/(used in) 599 38,268 6,462
financing activities
Net decrease in cash and (10,043) (1,782) (14,783)
cash equivalents
Cash and cash equivalents 14,624 15,899 15,899
at 1 January
Effects of exchange rate 222 507 2,829
movement on cash balances
Cash and cash equivalents 4,803 14,624 3,945
at end of period
Notes to the Condensed Interim Group Financial Statements
1. Basis of preparation
These condensed consolidated interim financial statements for the six months
ended 30 June 2011 have been prepared in accordance with the accounting policies
set out in the 2010 Annual Report (except as stated below), which comply with
International Financial Reporting Standards ("IFRS"), as adopted by the European
Union ("EU") in accordance with EU laws (IA`s regulation EC 1606/2002), and also
in accordance with IAS 34, `Interim Financial Reporting` as adopted by the EU.
The interim results for the six months ended 30 June 2011 are unaudited. They 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 as at and for the year ended 31 December 2010, which have been
prepared in accordance with IFRS as adopted by the EU. The financial information
set out in this document in respect of the year ended 31 December 2010 does not
constitute the Group`s statutory accounts for the year ended 31 December 2010.
Going concern
The Directors have prepared the financial statements on the going concern basis
having considered the current operations, the current funding position and the
projected funding requirements of the business for at least 12 months from the
date of approval of the financial statements as detailed below.
Current operations
The Company is facing two significant challenges: the rising water table in the
Central Rand Basin and unexpected delays with the underground mine development.
On 29 March 2011 the Company announced the results of its operational and
strategic review which considered these two challenges and led to the
announcement of the suspension of underground mining operations.
Rising water table
The water table in the Central Rand Basin is rising. It is imperative that the
water table is 250 meters below surface for the mine to retain access to its
Reserves and Resources and hence be able to reach full commercial production.
The Directors believe that the South African Government will inevitably need to
step in to resolve this to prevent AMD reaching the surface. The discussions
held by the Company with the Government to date and the public commitment made
by the Government to
resolving this issue give the Directors confidence that a suitable solution will
be found, although no deadline has been set.
Delays in underground mine development
In addition, the Company has encountered difficulties in the underground mine
development. A greater than anticipated level of stopes have been found to have
"double voids", ie, not only has the original Main Reef Leader been extracted
but also the Main Reef. This was not indicated on the historical mining plans.
The effect of these double voids has been to increase significantly the cost of
development per tonne of accessible ore and to reduce revenue compared with the
Company`s projections. Having encountered these voids, standard mining practice
would be to go deeper. However, as a result of the rising water table referred
to above, this is not an option available to the Company.
The Company has also faced lower than anticipated Mine Call Factors due to a
considerable proportion of vintage hanging wall (over and above the planned for
"middling") diluting the mined ore. The empty tonnes associated with this
dilution severely impact the cost per ounce of gold produced.
As a result of these challenges, underground mine development was suspended with
effect from 25 May 2011. The focus for the remainder of 2011 will be to continue
to investigate viable mining methods to avoid the dilution problem while mining
out ore from currently available stopes and processing all available underground
ore and surface materials. The underground operations will then be temporarily
stopped following extraction of ore from the immediately available stopes. The
Company has already commenced a process of reducing staff levels to reflect the
lower level of activity.
The Directors reviewed the carrying values of the Company`s assets at 30 June
2011 and believe that there is no further impairment required beyond what was
provided for at 31 December 2010.
Current and projected funding requirements
At 30 June 2011, the Company had cash of US$4.8 million. At the 31 July 2011 the
Company had a cash balance of US$4.0 million.
As reported in annual report 2010, the Directors have prepared cash flow
projections for the next 18 months (from the date of these financial statements)
that reflect the decision of the Directors to place underground operations on to
a care and maintenance basis, to continue to process the available ore from
developed stopes or on surface and to run the company with a significantly
reduced cost base to reflect these lower activity levels. These projections show
that the Group has sufficient funding for at least the next 12 months from the
date of approval of the financial statements and hence the Directors have
prepared the financial statements on a going concern basis. However, the
available cash is projected to run out in July 2012.
The risks inherent in any early-stage mining operation will continue to apply to
the Group. In particular, the cash flow projections prepared by the Directors
are critically dependent on three key assumptions: the gold grade of the ore;
the mining production; and the metallurgical recovery and production rate. If
any one of these key assumptions is not achieved, then this will result in the
need for additional funding at an earlier date.
Strategic options
As outlined by the Company in its operational and strategic review announced on
29 March 2011 and CEO`s report, the focus for the next few months will be to
seek further clarification on the Government`s position on the rising water
table regarding the engineering plans, costing and timing; to continue to
investigate viable mining methods; to continue to mine out the currently
available stopes.
The Directors expect to be able to reassess the prospects of the Company by the
end of October 2011.The Directors believe that the Reserves and Resources
statement is not undermined by the double voids as these are not believed to
exist at lower levels, and so assuming the above uncertainties can be
satisfactorily resolved, the Directors expect to seek new capital to restart the
operations (which would require further due diligence and quantification). If
insufficient progress is made to resolve the material uncertainties facing the
Company and without further funding being available by or around the end of
October 2011, the Directors are likely to have to cease trading.
Conclusion
The continued uncertainty around the resolution of the rising water table and
the continued difficulty in finding a viable mining method, together with the
need for additional fund raising if the water table and viable mining method
issues are satisfactorily resolved, are material uncertainties that may cast
significant doubt on the Company`s ability to continue as a going concern and
they may therefore be unable to realise their assets and discharge their
abilities in the normal course of business.
The financial statements are prepared on the basis of accounting policies
applicable to a going concern.This basis presumes that funds will be available
to finance future operations and that the realisation of assets and settlement
of liabilities will occur in the ordinary course of business.
2. Accounting policies
Except as described below, the accounting policies applied by the Group in these
condensed consolidated interim financial statements are the same as those
applied by the Group in its consolidated financial statements as at and for the
year ended 31 December 2010, as described in those consolidated financial
statements.
Taxes on income in the interim periods are accrued using the tax rate that would
be applicable to expected total annual earnings.
The following new standards and amendments to standards are mandatory for the
first time for the financial year beginning 1 January 2011.
IFRS 3: Business Combinations.
From 1 January 2011, the Group has applied IFRS 3 in accounting for business
combinations. The amendment lists the transition requirements for contingent
consideration from a business combination that occurred before 1 July 2010. The
amendment also describes the measurement of non-controlling interests and also
discusses un-replaced and voluntarily replaced share-based payment awards.
IFRS 7: Financial Instruments: Disclosures.
From 1 January 2011, the Group has applied IFRS 7 in accounting for financial
instrument disclosures. The amendments add an explicit statement that
qualitative disclosure should be made in the contact of the quantitative
disclosures to better enable users to evaluate an entity`s exposure to risks
arising from financial instruments. In addition, existing disclosure
requirements were amended and removed.
IAS 1: Presentation of Financial Statements.
From 1 January 2011, the Group has applied IAS 1 in accounting for presentation
of financial statements. The amendments clarify that disaggregation of changes
in each component of equity arising from transactions recognised in other
comprehensive income is also required to be presented, but may be presented
either in the statement of changes in equity or in the notes.
IAS 24: Related-party Disclosure.
From 1 January 2011, the Group has applied IAS 24 in accounting for related-
party disclosures. The revised standard amends the definition of a related-
party.
IAS 34: Interim Financial Reporting.
From 1 January 2011, the Group has applied IAS 34 in accounting for interim
financial reporting. The amendments add examples to the list of events or
transactions that require disclosure under IAS 34 and remove references to
materiality in IAS 34 that describe other minimum disclosures.
The following new standards and amendments to standards and interpretations have
been issued, but are not effective for the financial year beginning 1 January
2011 and have not been early adopted:
IFRS 7: Financial Instruments: Disclosures - Transfers of Financial Assets
IFRS 9: Financial Instruments: Classification and Measurement
IFRS 10: Consolidated Financial Statements
IFRS 12: Disclosure of Interests in Other Entities
IFRS 13: Fair Value Measurement
IAS 1: Presentation of Financial Statements
IAS 12: Income Taxes
IAS 19: Employee Benefits
IAS 27: Consolidated and Separate Financial Statements
3. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
During the six months ended 30 June 2011 management reassessed its estimates in
respect of:
- the carrying value of property, plant and equipment
- the units of production depreciation
- the impairment of assets
- net realisable value of non-current assets held for sale
- the recoverable amount of inventory (see note 8)
- provisions (see note 10)
4. Financial risk management
The Group`s financial risk management objectives and policies are consistent
with those disclosed in the consolidated annual financial statements as at and
for the year ended 31 December 2010.
Foreign currency rates
The US Dollar rates of exchange applicable to the year are as follows:
2011 2010 2010
Six months to Year ended 31 Six months to
30 June December 30 June
Closin Averag Closin Avera Closing Averag
g e g ge e
South African Rand 0.15 0.14 0.15 0.14 0.13 0.13
British Pound 1.60 1.62 1.55 1.55 1.51 1.53
5. Property, plant and equipment
During the six months ended 30 June 2011, the Group spent US$0 (six months ended
30 June 2010: US$215,820) to upgrade processing plants and US$0 (six months
ended 30 June 2010: US$7,151,601) was spent on mine development. US$950,909 was
spent on the purchase of the optical sorter and US$1,176,958 was spent on other
items of property, plant and equipment.
6. Non-current assets held-for-sale
At 31 December 2010, the Group classified an item of plant and machinery, a
Gekko 50 tonne per hour processing plant with a net realisable value of
US$4,494,839, as held-for-sale. During the period under review, the Group
disposed of the Gekko 50 tonne per hour for US$4,344,000, resulting in a profit
of US$434,400. The remaining proceeds of US$699,206 of a total US$5,043,206 and
remaining profit of US$23,482 of a total US$457,882 relates to the sale of other
items of property, plant and equipment. The proceeds will be received in
instalments over eight months to the end of September 2011.
During the six months ended 30 June 2011, pieces of mining equipment were
classified as held-for-sale. The value of the assets is now expected to be
realised from the sale of the assets rather than the continuing use. The value
of assets transferred to non-current assets held-for-sale is US$588,831 at 30
June 2011. Based on management`s estimate of the fair value to be obtained from
the sale, no impairment was required.
7. Loans receivable
Puno Gold Investments (Proprietary) Limited ("Puno")
Since the last report for the year ended 31 December 2010 there has been no
resolution to the dispute relating to alleged procedural breaches of the Central
Rand Gold South Africa (Proprietary) Limited ("CRGSA") Shareholders` Agreement
between CRGSA and its current Black Economic Empowerment ("BEE") shareholder,
Puno. The dispute surrounds the allocation of intercompany loans which fund the
budget and work programme and the incurring of, and level of, certain costs. In
order to avoid protracted litigation, the parties agreed to refer the matter to
arbitration pursuant to the dispute resolution mechanism under the Shareholders`
Agreement and this arbitration process is still in process. The Group still
believes that ultimately their position will prevail. The Board is still of the
opinion that this will not have any material consequences in respect of the
consolidated accounts of the Group. Notwithstanding this position, the Group
have, pending the outcome of any dispute, allocated 100% of the additional
intercompany loans directly from the Company to CRGSA. The additional 26% of
intercompany debt, excluding interest, amounts to ZAR15,495,796 (US$2,243,791)
between 1 January and 30 June 2011 and ZAR75,913,440 (US$10,416,083) between 1
January and 31 December 2010.
The loan payable to Puno contains the same allocations referred to above.
8. Inventory
Group
June December June
2011 2010 2010
US$ `000 US$ `000 US$ `000
Consumables 271 59 1,017
Ore stockpiles 715 125 158
Stationery and office consumables 101 23 30
on hand
Total inventories 1,087 207 1,205
The amount of the write-down of ore stockpiles to net realisable value and
recognised as an expense is US$16,701 (2010: US$263,451, 30 June 2010:
US$419,995).
9. Share capital and share premium
There has been no change in share capital and share premium during the six
months ending 30 June 2011.
10. Environmental rehabilitation and other provisions
Provisions consist of the following:
Group
June December June
2011 2010 2010
US$ `000 US$ `000 US$ `000
Non-current
Environmental rehabilitation 6,291 6,474 1,460
Current
Restructuring 851 - 605
Environmental rehabilitation - - 2,200
7,142 6,474 4,265
11. Other income and gains
Group
June December June
2011 2010 2010
US$ `000 US$ `000 US$ `000
Sundry income 16 36 6
Revenue* 10,476 11,645 3,830
Profit/(loss) on sale of property, 458 (24) 98
plant and equipment
10,950 11,657 3,934
*The revenue relates to the sale of 7,189 (30 June 2010: 3,085) ounces of gold.
Such revenue was previously netted off against the mine development expenses in
exploration expenditure.
12. Directors
During the current period, the composition of the Board changed. Two Directors
of the Group, Mr N Farr-Jones and Mr J Brauns, resigned on 24 June 2011.
13. Surface mining costs
Surface mining costs comprises the following items:
Group
June December June
2011 2010 2010
US$ `000 US$ `000 US$ `000
Consumables 3,069 4,409 -
Utilities 458 893 -
Plant hire 4,973 7,389 -
Labour hire 2,994 356 -
Environmental rehabilitation 354 3,497 -
provision
Other 1,097 555 -
12,945 17,099 -
14. Income taxes
Income tax expense is recognised based on management`s best estimate of the
weighted average annual income tax rate expected for the full financial year.
The estimated average annual tax rate used for the period under review is 0%
(2010: 1.18%, 30 June 2010: 3.69%). The decrease is mainly due to a decrease in
the intercompany loans from the Company to Central Rand Gold (Netherlands
Antilles) N.V. ("CRGNV") and the disallowed interest on these loans.
15. Commitments
Group
June December June
2011 2010 2010
US$ `000 US$ `000 US$ `000
Water pump 3,367 - -
Fees payable to iProp Limited for - 500 -
prospecting
Acquisition of tangible assets - 6,517 -
contracted for
Design of optical ore sorter - - 26
Mining equipment - - 1,176
3,367 7,017 1,202
16. Segment reporting
An operating segment is a component of an entity that engages in business
activities from which it may earn revenues and incur expenses, whose operating
results are regularly reviewed by the entity`s chief operating decision maker to
make decisions about resources to be allocated to the segment and assess its
performance and for which discrete financial information is available. The
entity`s chief operating decision maker reviews information in one operating
segment, being the acquisition of mineral rights and data gathering in the
Central Rand Goldfield of South Africa, therefore management has determined that
there is only one reportable segment. Accordingly, no analysis of segment
revenue, results or net assets has been presented. No corporate or other assets
are excluded from this segment.
17. Share based payments
No additional shares and share options in the Company were granted during the
six months ending 30 June 2011.
18. Related parties
No disclosable related-party transactions occurred during the period.
19. Events occurring after balance sheet date
On 16 August 2011 the double-room development drill rig was sold for US$490,419
(R3,497,001).
As part of scaling down of mine activities, approximately 83 employees were
retrenched on 15 July 2011 at a cost of US$586,440. In total, by the end of
October 2011 the staff head count will be reduced from 218 to about 59 at an
estimated total cost of US$1,105,060. All these costs were recognised and
provided for at the end of June 2011 as the retrenchment programme was approved
by the Board and communicated to employees before the end of June 2011.
Date: 26/08/2011 08:01:14 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.
Sharenet Sites 
