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CRD - Central Rand Gold Limited - Interim management statement
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")
INTERIM MANAGEMENT STATEMENT
1 Summary
The third quarter of 2011 has been a period of mixed fortunes for Central
Rand Gold. The Company has made significant progress in improving its
understanding of the operational uncertainties disclosed in the Company`s
announcement dated 29 March 2011. These uncertainties included rising Acid
Mine Drainage in the Central Basin; the occurrence of double voids (termed
Composite Double Voids) within Central Rand Gold`s current mining area; and
the challenge of dilution when utilising the longhole stoping methodology.
In that announcement the Company committed to providing its shareholders
with a re-assessment of its prospects based on the resolution of the
abovementioned uncertainties by the end of October 2011.
This re-assessment was interrupted by a decision taken on 22 September 2011
by the Minister of Mineral Resources of South Africa ("Minister") to cancel
the Company`s Mining Right. This decision was suspended on 24 October 2011
when the Minister consented to the temporary suspension of her decision to
cancel the mining right. Immediately thereafter, the Company re-commenced
mining operations and, by mid November 2011, 10,650 tonnes from surface and
2,697 tonnes from underground mining were delivered to the Metallurgical
plant and stockpile.
2. Sale process
As announced on 19 September 2011, Central Rand Gold has rejected all
takeover approaches received to date. Until the Company has greater
certainty with regards to its Mining Right, it does not believe that the
environment is conducive for any type of corporate transaction and, as
such, the board of directors of Central Rand Gold is not currently
considering the sale of the entire issued share capital of the Company
until this uncertainty is resolved. Accordingly, and following consultation
with the Takeover Panel, the Company confirms that it is no longer deemed
to be in an `Offer Period` for the purposes of the City Code on Takeovers
and Mergers.
The Company will continue with underground mining operations as highlighted
below, building further confidence in its mining methodology and reviewing
further opportunities with regards to its extensive prospecting areas.
3. Mining right challenge
As stated in the announcement dated 24 October 2011 ("the Announcement"),
the Minister consented to the temporary suspension of her decision to
cancel the mining right granted to Ferreira Estate and Investment Company
Limited ("FEIC"), the registered holder of Central Rand Gold`s mining right
under departmental reference number GP30/5/1/1/2/140MR.
As further stated in the Announcement, the suspension of the Minister`s
decision to cancel the mining right, which was enforced in terms of a court
order granted by the North Gauteng High Court, Pretoria ("High Court"), is
an interim arrangement pending final relief in the High Court to review and
set aside the Minister`s decision to cancel the mining right. These review
proceedings have already been instituted against the Minister and her
departmental corespondents.
Shareholders will be kept abreast of developments in these review
proceedings as they unfold.
4. Operational update
Mining operations
Mine production to date has been as follows:
Tonnes Average Mined Grade
Underground
Longhole Stoping 39,686 1.7 to 1.9 grams per tonne
Conventional Stoping 12,707 3.6 to 5.5 grams per tonne
Surface mining 171,606 2.8 to 3.3 grams per tonne
Total 223,999
Minor discrepancies exist between Mining tonnages, Stockpile Tonnages and Plant
throughput due to broken/crushed ore relative density estimates and survey
volumetric analysis.
Longhole Stoping
In the initial 2009 trial, longhole stoping was successful, realising only a
modest amount of hanging wall dilution. However, when full production was
attempted, in other areas of the Mine, there was often in excess of 200%
dilution by zero grade material, due to excessive hanging wall failure. This
dramatically affected the economics of this methodology and it was suspended in
May 2011.
Conventional hand-held stoping
The introduction of conventional Jack-Hammer mining techniques in July 2011 has
significantly improved the situation. This method uses much shorter shotholes
(approximately one metre in length) which consequently carry a much reduced
concussive charge. Even if hanging wall failure due to delamination is
experienced, 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 installing
additional support. As a result of the controlled breaking, an improvement in
overall grade reduction of only 23% from insitu to stockpile has been achieved.
In the absence of actual ore processing, this figure can be considered to
approximate to a calculated Mine Call Factor of 77%.
Underground mining operations re-commenced on 1 November 2011 and the Company
estimates that an additional 200,000 tonnes of underground ore material can be
accessed and mined with limited mine development being required. The Company`s
initial 12-month target will be to increase and maintain underground mine
production to approximately12 000 tonnes per month.
Current performance suggests that this is the future economic direction for this
Company.
Surface mining
Surface mining continues to perform well with an average insitu (undiluted)
grade of 4.3 grams per tonne and an average stripping ratio of 1:9 from January
2011 to date, which is below the target ratio of 1:10.
As of 31 October 2011, between 53,000 tonnes and 102,000 tonnes of Exploration
Target material is estimated to remain in the immediate Slot 8 surface mining
area. This material has been systematically mechanically trenched, geologically
mapped and lithologically sampled and assayed for gold and is estimated to run
at grades of between 1.6 grams per tonne and 3.2 grams per tonne. There is scope
to increase the potential grade of this material at the expense of tonnage
through ongoing in-pit grade control.
This free digging material will be excavated, blended and processed in the
Company`s carbon-in-pulp ("CIP") gold recovery plant with a view to testing and
better determining mined grades and tonnages, plant throughput characteristics,
metallurgical recoveries, as well as to assist in generating income for the
Company.
Included in this category of Exploration Target is an estimate of clean-up
residue from the current ore stockpile and spillage areas in the vicinity of the
now decommissioned Bateman concentrator unit.
It is estimated that the Exploration Target material will be exhausted towards
the end of the first quarter of 2012 and the standing stockpiles of surface
material will be fully depleted towards the end of May 2012.
Central Rand Gold Main Reef/Leader Exploration Target Summary
Mining Area Reef2 Exploration Target Material1
Spenser MR&MRL 2.7-3.2 grams per 18000 - 22000
tonne tonnes
New Unified MR&MRL 1.6-2.3 grams per 15000 - 30000
tonne tonnes
ROM Pad Cleanup Various 1.6-3.2 grams per 20000 - 50000
tonne tonnes
Notes: 1: 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.
2: "MR" refers to the Main Reef and `MRL` refers to the Main Reef
Leader.
Metallurgy
Ore processing through the Bateman Concentrator unit was discontinued at the end
of June 2011 due to less than satisfactory availability and relatively subdued
gold recovery rates.
Availability for the period January 2011 to June 2011 was 60%, primarily due to
the crushing and communition of hard underground sulphide ore. It was felt that
the substantial capital upgrade required for the Bateman crushing circuit would
not be the best use of available funds at the current levels of ore production
and that greater effort should be made optimising the performance of the CIP
circuit.
Further to this, average gold recoveries of 77% were achieved through the
Bateman flotation circuit, which, whilst in line with planned factors, could not
be substantially increased through further engineering.
Approximately 38,507 tonnes of ore was processed through the Bateman during the
year.
The CIP plant continued to perform well, processing approximately 98,096 tonnes
at an average built up gold grade of 2.81 grams per tonne for the period January
to September 2011. Gold recoveries rose from 90% to 93%, and availability rose
from 90% to 91%.
At the end of September 2011 surface oxide ore, underground sulphide ore and
reef development stockpiles were estimated at 56,483 tonnes an average grade of
2.73 grams per tonne.
Toll Treatment
Following the success of the previous high grade tailings toll treatment
campaign undertaken in conjunction with a neighbouring processing plant operated
by Mintails Limited ("Mintails"), the Company is pleased to announce a further
trial toll treatment programme whereby approximately 30,000 tonnes of
underground ore is scheduled to be treated at the Mintails Mogale gold facility.
This 90-day campaign will allow for the monetisation of surplus underground ore
and existing underground stockpiles through external processing while the
Central Rand Gold plant is operating at nameplate capacity with surface
material. This arrangement may be extended to cover ore surplus to plant
capacity beyond this initial trial period.
5. Financial Update
Cash and cash equivalents at 31 October 2011 are reported at US$4.6 million
compared to US$4.8 million in June 2011. Significant cash movements during
the four-month period to end October 2011 can be attributed mainly to trial
conventional mining activities and the further retrenchment of 118
employees. These cash movements were however, mitigated by reduced security
deposits and further extraction of nearby surface materials producing
approximately 4,928 ounces of gold at a cash cost of US$1,401 per ounce.
Gold production for the year up to October 2011 amounted to 12,116 ounces.
Gold production was severely impacted due to the temporary suspension of
all mining activities as a result of the Minister`s cancellation of the
Company`s mining right. The Company expects to produce approximately 1,000
ounces per month for the remainder of the year.
Set out below is an abridged cash flow statement for the four months to end
October 2011.
US$ Million
Cash and cash equivalents at 1 July 2011 4.8
Gold sales 8.2
Cash used in operations (10.2)
Reduction of security deposits 1.4
Proceeds on sale of assets 0.5
Interest received 0.4
Effects of exchange rate movements on cash (0.5 )
balances
Cash and cash equivalents at end October 4.6
6. Strategic review
Since March 2011, the Company has been working on resolving the following
three key operational uncertainties, impacting on the future prospects of
the Company:
- Acid Mine Drainage;
- Composite Double Voids; and
- Completion of conventional mining studies.
Acid Mine Drainage
The Company continues to engage with the South African Government ("Government")
around the issue of the rising water table in the Central Basin. Trans Caledon
Tunnel Authority ("TCTA") (appointed implementing agent by the Minister of Water
Affairs) has completed its due diligence on developing a solution for the
Central Basin. This solution was presented to the Government`s Portfolio
Committee on Water and Environmental Affairs, on 7 September 2011. 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.
* The sale of grey water, where possible.
TCTA has issued a single tender for all three basins and tenders are expected to
be adjudicated and awarded by January 2012, with the pump station being
commissioned by September 2012. A concern remains with regards to funding, as
TCTA still awaits for National Treasury to allocate and commit funds for the
full implementation of the AMD solution across all three basins. The Company is
currently in discussions with TCTA to agree on the principles of dewatering the
Central Basin below ECL.
Composite Double Voids
Following an internal study undertaken by Mr Keith Matier ("the Study") it was
possible to isolate areas of the greatest potential for Composite Double Voids
and, further, to compare the impacted areas with the remaining unaffected areas.
Based upon the outcome of the Study, it is estimated that the impacted area for
0 to 450mbs represents less than 5% of the total Resource base for such depth
range within the Consolidated Main Reef leasehold. Furthermore, only an
estimated 38% of the impacted 5% is believed to represent areas of Composite
Double Voids.
As the total combined impact of Composite Double Voids as determined by this
Study is less than 3% of the area affected, it is not deemed necessary to adjust
the Main Reef Mineral Resource base.
The full report is available on the Company`s website: www.centralrandgold.com.
Outlook
The success of the trial phase of the conventional stoping methodology was
announced on 10 October 2011. This announcement included reference to the
publication on the Company`s website of the conceptual level study undertaken by
specialist mining engineering company, Minequest Consult (Proprietary) Limited,
with regards to the Life of Mine Plan for the CMR West area. This study revealed
that within the CMR West mining area, a financially successful hybrid mining
methodology can be implemented and a production rate between 35,000 tonnes to
50,000 tonnes per month could be achieved. The full report is available on the
Company`s website: www.centralrandgold.com.
Whilst the success of the conventional mining trial gives the Company a great
deal of encouragement, Central Rand Gold still faces a number of significant
challenges that need to be addressed. The Company continues to work towards
finding solutions to these challenges, building on the progress made with the
new stoping methodology, and looks forward to updating shareholders as
appropriate.
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
Note: The information in this statement relating to Mineral Resources and
geology has been reviewed and approved by Mr Matier, BSc (Hons), GDE, Pr Sci
Nat, who is a competent person in terms of the SAMREC and JORC codes. Mr Matier
is the Geology Manager of Central Rand Gold South Africa (Proprietary) Limited
and has over 17 years` experience in precious metal exploration, mineral
resource management and evaluation.
18 November 2011
Johannesburg
JSE Sponsor
Merchantec Capital
Date: 18/11/2011 09:00:03 Supplied by www.sharenet.co.za
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