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CRD - Central Rand Gold Limited - Operational update
Central Rand Gold Limited
(Incorporated as a company with limited liability under the laws of
Guernsey,
Company Number 45108)
(Incorporated as an external company with limited liability under the
laws of South Africa,
Registration number 2007/0192231/10)
ISIN: GG00B24HM601
LSE share code: CRND JSE share code: CRD
("Central Rand Gold" or the "Company")
OPERATIONAL UPDATE
Introduction
On 29 March 2011, Central Rand Gold identified three critical challenges
facing the Company, which included the rising water table in the Central
Basin, the appearance of double voids (termed Composite Double Voids) and
the challenges of dilution through its proposed long hole stoping
methodology.
The issue around Composite Double Voids was comprehensively addressed in
an announcement issued by the Company on 15 September 2011. Not only was
the impact of the Composite Double Voids demonstrated to be minimal, the
impacted areas were also shown to be relatively predictable.
Accordingly, the Company provides the following update with regards to
the remaining challenges, namely the rising water table and the dilution
challenges resulting from the proposed long hole stoping methodology.
1. Rising water table
The Company continues to engage with the South African Government
("Government") around the issue of the rising water table in the Central
Basin. As reported on 27 July 2011, the Ritz submersible pumps ("pumps")
were successfully tested in Germany in the presence of Trans Caledon
Tunnel Authority ("TCTA") (appointed project managers by the Department
of Water Affairs). The pumps will remain in Germany until such time as
clarity with regards to Company`s Mining Right has been obtained.
On 7 September 2011, having completed its due diligence on developing a
solution for the Central Basin, TCTA presented a proposed solution to the
Government`s Portfolio Committee on Water and Environmental Affairs. The
proposed solution includes:
* A commitment to protect the Environmental Critical Level ("ECL") in
the Central Basin at 186 metres below surface ("mbs"). This
represents an approximate level of 225mbs in Central Rand Gold`s
mining area.
* The construction of a New High Density Sludge Plant with a plant
capacity of 84 million litres per day next to the South West
Vertical Shaft.
* Utilisation of Central Rand Gold`s pumps to de-water and maintain
the Central Basin.
* The transfer of treated water via pipeline to Elsburg Spruit.
* Co-disposal with Durban DRD Gold of sludge via dual lines.
* The sale of grey water, where possible.
It is anticipated that construction will commence in January 2012, with
commissioning occurring in August 2012.
TCTA will now approach the National Treasury Department for additional
funding as the R225 million (US$27 million) initially allocated to
resolve the entire Acid Mine Drainage problem in the Witwatersrand area
has proven to be insufficient; a revised budget of R924 million (US$114
million) has been proposed.
2. Feasibility of Conventional Hand Held Stoping
One of the main contributing factors leading to the decision to abandon
the mechanised longhole stoping previously undertaken at the mine, was
the very significant amount of zero grade material arising from the
immediate hanging wall of the Main Reef Leader, which was significantly
diluting the ore being processed.
Joints and bedding planes within the rocks above the reef have, over
time, become separated and, to a large extent, delaminated. The explosive
concussion associated with the original longhole stoping, which
necessitated the drilling of blastholes up to 15 metres in length, often
exacerbated the delamination, causing slabs consisting of barren hanging
wall waste in excess of two metres to dilute the reef ore. Without the
means to efficiently remove this barren material from the broken ore, it
became rapidly apparent that the method of longhole extraction of reef
ore is not economically viable.
A more conservative, hand-held conventional technique was therefore
proposed as a potential solution to address this dilution challenge. The
Company identified three key points against which this study should be
evaluated:
1. Can the reef be safely stoped using the proposed conventional means'
2. Can dilution from the hanging wall be eliminated or managed'
3. Is the methodology commercially viable'
Safety in the conventional stoping trial
In June 2011, Central Rand Gold initiated a trial phase of conventional
hand-held stoping in selected pre- developed areas. To this end, the
Company engaged the services of specialist conventional South African
mining entity, Sekgwa Mining Services (Proprietary) Limited ("Sekgwa
Mining"), for a three month period. Sekgwa Mining has both the relevant
experience and necessary competence in scattered conventional mining.
During the three months of conventional trials, the Company has not had a
single accident resulting from an uncontrolled fall of ground. This has
been achieved through a support structure of 1.8 metre long resin bolts
in on reef development, 150 millimetre to 200 millimetre elongates
installed in a tight one metre by one metre grid within stope panels and
a line of three stick clusters on a one metre spacing every 10 metres on
strike. In addition, three stick clusters are installed at one metre
spacing along gullies and raises.
The Company is satisfied that conventional stoping techniques can be
undertaken safely.
Dilution Management in the conventional stoping trial
In table 1 a comparison is made of the impact of hanging wall dilution
arising from the three mining methods trialled to date, namely "Reef
Drive Longhole Stoping", "Footwall Drive Longhole Stoping" and
"Conventional Hand Held Stoping".
Table 1: Impact of dilution with different mining methods.
Working Method Insitu Stopping/Actual Belt/Stockp Observed Insitu to
Place Main Cut Values ile Values Total Belt
Reef Dilution Grade
Values Reduction
1534RD Reef Drive 5.03g/t 1.8g/t / 325cm 1.72g/t 207% 66%
Longhole / 106cm
15719_13 FW Drive 4.51g/t 2.43g/t / 293cm 1.71g/t 95% 62%
Longhole / 150cm
15113_10 Conventional 4.44g/t 4.13g/t / 206cm 3.41g/t 29% 23%
Hand Held / 160cm
The Reef Drive Longhole stoping method was successful in the initial 2009
trial area and realised only a modest amount of hanging wall dilution.
However, when full production was attempted it was observed that there
was in excess of 200% dilution by zero grade material, due to the
excessive hanging wall failure. Whilst the Reef Drive method did allow
for limited underground and surface waste sorting, the reduction in grade
from insitu to stockpile was in excess of 60% which was clearly not
acceptable.
The replacement mechanised mining technique, involving the development of
the Footwall drives and cross-cutting to the reef at regular intervals,
was certainly effective in reducing high development costs.
Unfortunately, the excessive blast concussion from longhole stoping
recreated a similar pattern of hanging wall dilution to that previously
observed. The mining area where this methodology was initially employed
showed less dilutive hanging wall (due presumably to localised lower
incidence of jointing). Unfortunately, the ability to conduct waste
sorting underground and on surface was hampered due to the constricted
nature of the draw-point geometry, which required regular re-blasting of
hanging wall slabs, which frequently choked the draw-points. As a result
of this inability to remove dilution, the actual reduction in grade from
insitu to stockpile was also shown to be in excess of 60%. Consequently,
this methodology is not economically viable.
The introduction of hand-held conventional mining has been shown to
improve the situation significantly. This method uses much shorter
blastholes (around one metre in length) which consequently carry a much
reduced concussive charge. Even if there is hanging wall failure due to
delamination, it is limited to the one metre blasted panel advance and
can therefore be easily sorted and contained prior to tramming. Hanging
wall support between blasts allows for the continuous assessment of
hanging wall dilution and remedial action such as barring or implementing
additional support. As a result, an improvement in overall grade
reduction of only 23% from insitu to stockpile was measured. In the
absence of actual ore processing, this figure can be considered to
approximate to a calculated Mine Call Factor of 77%.
It is also important to highlight the fact that of the three methods
employed to date, conventional hand-held stoping is the most amenable to
selective mining which allows for a high degree of flexibility and
optimisation.
Commercial viability of conventional stoping
In addition to contracting Sekgwa Mining to test the practicalities of
conventional hand held mining, a specialist mining engineering
consultancy, MineQuest Consult (Proprietary) Limited ("MineQuest"), was
engaged to develop a Life of Mine ("LOM") feasibility and economic study
on the western portion of the CMR property to a depth of approximately
450 mbs. MineQuest`s initial study was based on a hybrid mining style
combining conventional hand-held stoping and mechanised development and
tramming.
The initial study concluded that a 30 000 to 40 000 ounce per annum
operation is viable, giving a LOM of approximately 12 years. This initial
study and schedule estimates a project cash operating cost (mine site
cash expenses which includes direct mining, ore processing and on-site
general and administrative costs) of R427 per ton (US$779/oz) and total
production cost (cash operating costs plus capital expenditure which
includes plant, equipment and development costs) of R586 per ton
(US$1,068/oz). If the initial mine plan was implemented, approximately
700 new jobs could be created during the course of the CMR West LOM. The
full report was supplied to the Department of Mineral Resources in
support of a rescaling of the Company`s original mine work programme.
A further report was subsequently compiled by MineQuest to optimise the
CMR West mining plan maximising extraction economics. The optimised 50
000 ounce per annum plan suggests a cash operating cost of R342 per ton
(US$623/oz) and total production cost of R492 per ton (US$899/oz) and a
positive LOM net operating cashflow of R1.5 billion (US$187 million) at
an average gold price of $1,613 per ounce. The complete MineQuest
scoping study is available on the Company`s website:
www.centralrandgold.com
Way Forward
The Company believes that the new conventional mining method is scalable
and repeatable across its tenement area, which would enable the creation
of the original `string of pearls` concept. There remains sufficient
mineral inventory on both CMR East and Crown West to establish two
similar sized operations that could be brought on line in parallel with
the proposed CMR West operation and generate a significant number of
additional jobs over and above the 700 required under the mine plan for
CMR West.
In light of the Department of Mineral Resources` cancellation of the
Company`s Mining Right, the implementation of the above plan can only be
considered once its has successfully appealed the Minster`s decision. The
Company, dependant on court availability, hopes that its appeal will be
heard by the Pretoria High Court by end October 2011.
For further information, please contact:
Central Rand Gold +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 +44 (0) 20 7466 5000
Bobby Morse / James Strong
Jenni Newman Public Relations
(Proprietary) Limited +27 (0) 11 506 7351
Jenni Newman
10 October 2011
Johannesburg
JSE Sponsor
Merchantec Capital
Date: 10/10/2011 08:00:02 Supplied by www.sharenet.co.za
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