To view the PDF file, sign up for a MySharenet subscription.

CRD - Central Rand Gold - CRG is pleased to announce its annual results for

Release Date: 02/04/2012 10:02
Code(s): CRD
Wrap Text

CRD - Central Rand Gold - CRG is pleased to announce its annual results for the year ended 31 December 2011. 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 "CRG" or the "Company") Annual Report Release CRG is pleased to announce its annual results for the year ended 31 December 2011. Highlights 2011: * Successful conventional mining trials completed supporting a financially viable hybrid mining technology that could achieve a production rate of 35,000 to 50,000 tonnes of ore per month. * Resolution of mining right dispute with the South African Department of Mineral Resources. * No fatalities for the fourth consecutive year. 14,856 ounces of gold produced compared to 9,321 ounces in 2010. * Submersible pumps to dewater Central Basin successfully tested. Cost base and infrastructure aligned with current operations. " Having negotiated a very challenging period in 2011 when the Company`s mining right was under threat, it is pleasing to be looking forward to a much more certain environment in 2012" - Johan Du Toit For full copies of the Company`s Annual Report and Accounts, including the Company Profile, Directors` Report, Corporate Governance and Sustainable Development Report, Directors` Responsibility Statement, Company Secretarial Confirmation, Auditor`s Report and full Financial Statements, please refer to the Company`s website: www.centralrandgold.com. In addition, the notice of the 2012 annual general meeting to be held on Tuesday 24 April 2012 has now been released using electronic means. Shareholders should, therefore, download copies of the circular, notice and forms of proxy at www.centralrandgold.com. Shareholders are advised that the annual general meeting ("AGM") of the Company is to be held at the offices of Carey Olsen, Carey House, Les Banques, St Peter Port, Guernsey, GY1 4BZ (not at the registered office) at 11:00 (UK time) on 24 April 2012. Shareholders wishing to participate in the AGM in Guernsey via video link from London may do so at the offices of K & L Gates, One New Change, London, EC4M 9AF. Shareholders in South Africa wishing to participate in the AGM via video link from Johannesburg may do so at the offices of Rudolph, Bernstein & Associates, Block B, 7 Eton Road, Sandhurst, Johannesburg. 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 Merchantec Capital +27 (0) 11 325 6363 Marcel Goncalves / Monique Martinez Buchanan Communications Limited +44 (0) 20 7466 5000 Bobby Morse / James Strong Jenni Newman Public Relations (Proprietary) Ltd +27 (0) 11 506 7351 Jenni Newman Chairman`s Report I present to you the annual report of a Company that is altogether in a more positive space than it was this time last year. Current status While it has been a turbulent year, dramatic progress has been made on many of the significant problems that faced the Company. * The South African Government has now committed to resolving the underground Acid Mine Drainage ("AMD") issues that affect the whole Witwatersrand Basin, and whose rising water table threatened our Mineral Reserves and Resources. Engineering of this project is well under way. * Ground-breaking analysis by the Company`s geologists has tamed the seemingly random nature of "composite double voids" being encountered underground - where we not only discovered the expected void where the Main Reef Leader had historically been extracted, but unexpectedly discovered our target reef (the Main Reef) had also been extracted. * Reconstruction of the economics and geology of the time (in particular the width of the middling between the reefs) has rendered these composite double voids highly predictable. The frequency and the impact on reserves and mine economics are now not considered material, and abortive development into them can largely be avoided. - After much heartache and expense, the Company has settled on a proven mining methodology: - Long-hole mechanised stoping from reef-drives was abandoned in September 2010 as a result of the difficulties in supporting the drives. - Long-hole stoping from footwall drives and crosscuts was abandoned in June 2011 because of the dilutive effects of the long-hole blasting percussion bringing down too much hanging wall waste. - The Company has successfully reverted to in-stope, typical South African hand-held drilling. Four months of steady-state production has delivered the Company into cash-flow positive territory. This operating profit could, and should, be applied to replacement development in 2013, but it is not enough to fund any expansion. - Safety concerns about working under vintage hanging wall have proven manageable thus far, primarily because of conservative rock engineering and the low percussive impact of this conventional methodology. Last year, the Company`s Auditors agreed with the "going concern" status of the Company on the basis that it had sufficient working capital to see it through 15 - 18 months, within which time some action to guarantee further funding, whether it be capital raising, debt or corporate action, would be needed. This year, the "going concern" status has been agreed on the basis of a sustainable, cash-positive organisation, though noting that any substantial expansion in production would require external funding. Mineral rights In its 2008 Mining Right Application, the Company submitted the requisite Social and Labour Plan ("SLP"). This SLP was based upon the 2007 founding vision of a one million ounce per year producer. Whatever the ultimate size of this Company, and there is indeed still huge potential, such large volumes of gold production remain a long way off. The South African Department of Mineral Resources ("DMR") periodically conducts compliance audits against the initial SLP. While there are many areas where the Company punches considerably above its current weight, it is clearly not in a position to meet the commitments of an operation 20 times larger than its current size. The Company has, without success, sought to open a dialogue on agreeing some sort of progressive or proportional basis for a revised SLP. In September 2011, the South African Minister of Mineral Resources ("Minister"), without warning or pre-conditions, withdrew the Company`s Mining Rights. This action was successfully interdicted, subject to judicial review. The Minister then withdrew from the judicial review and the Mining Rights were returned unopposed. It is expected that this turbulent process has set the scene for a more rational engagement with the DMR. Concept refinement The conventional mining that is now proving successful has been undertaken from the development infrastucture, with its closer spacings, inherited from the long-hole mechanised stoping layout. This is currently being changed to the longer distances between raises and longer panel lengths more typical of conventional mining on the Witwatersrand. This requires dramatically less on- reef development than is currently the case and will further reduce operating costs. When the Company is able to demonstrate twelve months of cash positive operations, which it should do by the end of 2012, we may be in a position to talk credibly about the valuation gap between how the Company sees itself and how it is currently assessed in the market. Understandably, the market has been unwilling to accord any value to the "blue sky" of the balance of the resource base until we are genuinely at a "concept proven" stage. We are getting there. The challenge Restoring value to our shareholders is the challenge now facing the Company. This can only be done by identification and delivery of a growth plan with attractive short-term prospects and credible long-term aspirations. * At our present size, operating profits are expected to suffice to fund the replacement development, which must recommence in 2013, to maintain current production levels, and not a lot more. * Organic growth would be a very slow process, draining the organisation of cash, deferring the prospects of any returns to shareholders, and possibly putting Prospecting Rights and future Mineral Rights at risk on a use-it-or-lose-it basis. * The organisation, in its current "de minimus" concept-proving stage, is at the wrong end of economies of scale. For almost no increase in overhead costs the Consolidated Main Reef ("CMR")operations could triple production and dramatically improve the profitability. This is currently planned for 2014, following a successful twelve-month operating campaign at current levels, but some capital funding would be required. * Approaching our long-suffering shareholders for further capital or accessing the debt markets are difficult alternatives, but they will be considered in depth in the coming months. * The considerable change in our shareholder base, with a large-scale replacement of institutional investors by the retail market, is a dynamic that is not without its potential, either in terms of capital raising, or simply in terms of closing the valuation gap. The much more sanguine aspirations of the Company, the change in shareholder base, and the costs and effort of maintaining a LSE Main Board listing combine to suggest that an Alternative Investment Market ("AIM") listing may be more appropriate. The Board believes that the dramatic reduction of risk over the last year and the delivery of a practical ongoing production plan make it possible to meet the regulatory requirements of such a move. Accordingly, it is the intention to approach the shareholders as soon as reasonably practical to request their approval of such a move. Puno Gold Investments (Proprietary) Limited ("Puno ") The ongoing struggle with Central Rand Gold South Africa (Proprietary) Limited`s ("CRGSA") Broad-Based Black Economic Empowerment ("B-BBEE") partner, Puno, continues at a pedestrian pace. A court date has been set to hear our application to either find that our understanding of the funding mechanisms in the CRGSA Shareholders` Agreement is correct, or to have the Court appoint an arbitrator. This court application has proven necessary in order to overcome Puno`s frustration of the appointment of an arbitrator by the means envisioned in the Shareholders` Agreement. In the meantime, Puno misses few opportunities to take its case to the "Court of Public Opinion" in South Africa, a one-sided process that the Company has elected not to publically engage in. Recognition While this Company has faced the threats of AMD, composite double voids and the establishment of an alternative mining methodology, it has shrunk to minimal levels of staff. This has necessitated across-the-board retrenchment. Many fine people have been retrenched, taken voluntary retrenchment packages, or simply moved on. This has been an unfortunate and distressing process. I extend the sympathies of the Board of Directors ("Board") to those who have been impacted and our best wishes for success in such new direction as they may find. The Board has been reduced to the statutory minimum, in sympathy and as part of the necessary cost savings, with the resignations of Messrs Nick Farr-Jones and Jerome Brauns. Their wise counsel will be missed. Governance Shareholders will appreciate that with the reduction in head-count, particularly in terms of independent directors, and financial and internal audit staff, the organisation is stretched. Despite this, the Directors are confident that the segregation of power and the effectiveness of internal control remained. There is a separate section on Corporate Governance in the body of the report. Michael McMahon Chairman Chief Executive Officer`s Report Introduction The 2011 financial year will be remembered as a very tough year as the Company had to navigate its way through significant operational challenges. In March 2011, the Company announced the commencement of a strategic review as it encountered and identified major business risks such as: * rising Acid Mine Drainage in the Central Basin; * the existence of composite double voids within its targeted mining areas; and * high levels of ore dilution due to the use of the long-hole stoping methodology. As a direct result, in March 2011 the Company announced the suspension of underground production and development, and the commencement of a strategic review process to determine the future prospects of the Company. This far- reaching step unfortunately required a staff redundancy process, which ultimately resulted in 116 staff members being retrenched. By September 2011, the Company was able to publish a new life-of-mine and economic study on the western portion of the CMR property to a depth of approximately 450 metres below surface. This was largely due to the clarifying of the abovementioned business risks, coupled with the successful completion of a three month trial on conventional hand-held stoping. Without doubt, one of the biggest disappointments of the year was the decision by the Minister on 26 September 2011 to cancel the Company`s New Order Mining Right ("Mining Right"), just as the Company was starting to gain fresh momentum based on the new mining methodology. On 24 October 2011, the Minister announced that her decision to cancel the Company`s Mining Right had been temporarily suspended, pending judicial review. This enabled the Company to continue with its operations. The Minister subsequently indicated that the South African Government ("Government") did not wish to pursue the judicial review and the Mining Right was officially restored to the Company, in a Court sanctioned agreement, on 22 December 2011. My report outlines the major corporate and operational activities that took place during the year, setting the scene for further progress in 2012, taking into account the uncertainties that still affect the Company and its ability to realise its potential and plan for the future. 2011 Business Risks Acid Mine Drainage 1. The rising water table in the Central Basin as a result of Acid Mine Drainage was a matter of major concern for the Company during 2011, leading to the suspension of underground mining development in the second quarter of the year. In July, the Company successfully tested two submersible water pumps in Germany, capable of pumping 1,500 kilolitres of water per hour at 43 bar pump pressure differential with a pump efficiency rate of 81.1%. These were acquired at a cost of Euro3.5 million from an international technology supplier, Andritz Ritz, as part of the Company`s own contribution to solving the water problem in the Central Basin. Throughout the year, the Company engaged with the mining industry, service providers and the Government, around the issue of the rising water table in the Central Basin. Encouragingly, Trans-Caledon Tunnel Authority ("TCTA") was appointed by the Minister of Water Affairs as the implementing agent for the proposed solution that was presented to the Portfolio Committee on Water and Environmental Affairs on 7 September 2011. This proposed solution includes: * A commitment to hold the Environmental Critical Level ("ECL") in the Central Basin to 186 metres below surface. This represents an approximate level of 225 metres below surface in Central Rand Gold`s mining area. * The construction of a new high density sludge plant with a capacity of 84 million litres a day next to the South West Vertical Shaft. * Utilisation of Central Rand Gold`s two submersible water pumps to dewater and maintain the Central Basin. * The transfer of treated water via pipeline to Elsburg Spruit. * Co-disposal of sludge with DRD Gold. * The sale of grey water, where possible. The water inflow into the Central Basin over the last 12 months has been much slower than anticipated. The water table rose on average by 0.36 metres per day ("mpd") in 2011, this in comparison to a historical average of 0.5 mpd. Encouragingly, the 2012 year to date average rate of rise remains in line with the 2011 average. If this trend continues, the latest estimates are that ECL will only be breached during the second quarter of 2013. TCTA issued a single tender for all three basins and the awarding of the contract is expected by the end of April 2012, with the construction of the plant expected to commence immediately. Commissioning is expected to take place in the first quarter of 2013. The Company is in the process of finalising its agreement with TCTA, on dewatering principles and the final contract is expected to be signed during the second quarter of 2012. 2. Completion of composite double void study Following the announcement in March 2011 that the Company was encountering what appeared to be unrecorded mining voids in areas believed to not have previously been mined, a comprehensive study was undertaken to fully determine and understand the reason behind their occurrence, and to provide a means for detection and prediction of future occurrences. In mid-September 2011, the Company was able to announce that the study confirmed that the incidence of the composite double voids was limited to very specific areas and conditions, and that general prediction of their occurrence would be possible. The study showed that the development of these composite double voids appeared to be limited to areas where the entire Main Reef, Middling and Main Reef Leader package had been extracted as one economic package, partly as a result of particularly thinly developed Middling. This is geologically predictable. Importantly, the study revealed that the combined impact of composite double voids was less than 3% of the area affected, with a resultant negligible impact on the Main Reef Mineral Resource base. The study also showed that in the impacted CMR leasehold area, less than 5% of the resource base between zero and 450 metres below surface, was affected. A full report on the study is available on the Company`s website. 3. Mine dilution Long-hole stoping was suspended in May 2011 due to unacceptably high dilution from the zero grade material arising from concussion causing the immediate hanging wall of the Main Reef Leader to collapse onto the blasted reef. In some cases, dilution rates of up to 207%, were reported. A trial phase of conventional hand-held stoping was undertaken in selected pre- development areas. This trial was carried out by Sekgwa Mining Services (Proprietary) Limited ("Sekgwa Mining"). The objective of this trial was to ascertain whether: * the reef coud be safely stoped using conventional means; * the methodology could effectively control dilution from the hanging wall; and * the methodology is commercially viable. By the end of September 2011, all three objectives had been achieved and the Company decided to adopt this stoping methodology for its underground operations. In addition to testing the practicalities of hand-held stoping, the Company engaged the services of specialist mining engineering consultancy, MineQuest Consult (Proprietary) Limited ("MineQuest"), to develop a life-of-mine economic study on the western portion of the CMR property to a depth of approximately 450 metres below surface. MineQuest`s study was based on a hybrid mining style combining conventional hand-held stoping together with mechanised development and tramming. Significantly, MineQuest`s study concluded that a 30,000 - 40,000 ounces a year operation is viable, with a life-of-mine of approximately 12 years. The Company believes that, subject to further funding, the new conventional mining method is viable and repeatable across its tenement areas. There is 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. 4. Mining Right On 5 August 2011, the Company received notification from the DMR that it was reviewing the Company`s New Order Mining Right ("Mining Right") that was granted in August 2008. The Company was advised that it needed to make a presentation - supported by accompanying documentation - essentially outlining why its Mining Right should not be cancelled. This presentation - with supporting documentation - was made to the DMR on 24 August 2011. No response was received from the DMR following this presentation. On 26 September 2011, the Company received a Section 47 notice, advising that its Mining Right had been cancelled due to the Company not fulfilling its Social and Labour Plan expenditure. On 24 October 2011, the Minister announced that her decision to cancel the Company`s Mining Right had been temporarily suspended, pending judicial review. This enabled the Company to resume its normal mining activities and operations. It is important to note that the Company sent a detailed letter to the Minister on 9 September 2011, outlining why it had only spent R18.8 million on its Social and Labour Plan over a two year period, compared to the R32.2 million it had committed to spending. The letter - which was also published on the Company`s website - pointed out that due largely to the rising water table in the Central Basin, the accessible resource base had diminished to 431,000 ounces from the 3.25 million ounces on which the original Social and Labour Plan was based. This had caused the Company to amend its mining strategy and methodology and sharply reduce its staff requirements and human resource development targets. It also argued that the Company`s purchase of two submersible water pumps, at an approximate cost of R35 million, to control the rising water table in the Central Basin, should be taken into consideration and be offset against the R14 million investment shortfall in the Social and Labour Plan. The letter comprehensively outlined the challenges the Company has faced over the past few years and put forward a strong argument for why the Mining Right should be fully restored. On 12 December 2011, it was widely reported in the media that the DMR would not be opposing the Company`s High Court application to set aside the cancellation of the Mining Right. The Company`s Mining Right was officially restored in the High Court on 22 December 2011 by a Consent Order, setting aside the administrative decision announced by the Minister on 22 September 2011. This was an excellent way for the Company to end the year, removing a major stumbling block in the way of moving forward with plans to realise the Company`s potential. Exploration and geological update Resources and reserves During February 2012, Resource evaluation studies on the Main Reef, undertaken by Dr Carina Lemmer (an Independent Competent Person), incorporated additional sampling information obtained through the current surface and underground mining. This exercise has allowed for the reclassification and upgrade of approximately 160,000 ounces contained within the area into the SAMREC compliant Measured Resource category. 1. Main Measured Resources Indicated Inferred Resources Reef CMR Resources Depth Tonnes Grad Conte Tonne Grad Conte Tonne Grad Content (mbs) (milli e nt s e nt s e (Moz) on) (mill (mill (g/t (Moz) ion) (g/t (Moz) ion) (g/t ) ) ) 30 - 100 0.34 3.19 0.03 1.12 3.14 0.11 metres 100 - 1.13 3.69 0.13 4.61 4.18 0.62 450 metres 450 - 3.25 5.21 0.54 900 metres 900 - 2.92 6.29 0.59 0.27 6.21 0.06 1,500 metres 1,500 - 2.68 7.57 0.65 0.25 7.97 0.07 3,000 metres Total 1.47 0.16 14.58 2.51 0.52 0.13 Average 3.57 5.38 7.07 * Totals and averages are based on additional decimal points. This represents an increase in Measured and Indicated Resources of approximately 3%. Whilst the quantum of increase is relatively minor, the confidence increase between Measured Resource and Indicated is substantial. This confidence increase is largely due to additional verification sampling undertaken during the course of current operations. It is worth noting that the Resource now excludes material shallower than 30 metres (which has been reclassified as Exploration Target Material and is currently being exploited through open pit mining). This updated Mineral Resource also takes into account the Resource depletion arising from the Company`s underground mining activities over the past 24 months. The Company`s Resources in other areas remain unchanged. This upgrade only impacts the Main Reef in the CMR area. The tabulation below details a comparison of the impact of this new resource upgrade on the entire Resource base. Rounding from the original Resource reports has created minor inconsistencies with respect to grade and content. Area February 2012 Resource Statement Measured Resource Indicated Inferred Resource Resource Tonn Grad Conte Tonne Grad Cont Tonn Grad Cont es e nt s e ent es e ent
(mil (g/t (Oz) (mill (g/t (Oz) (mil (g/t (Oz) lion ) ion) ) lion ) ) ) CMR Main 1.5 3.6 0.17 10.3 5.2 1.73 1.1 10.3 0.37 S Reef & Main h Reef Leader a l l o w e r t h a n 9 0 0 m b e l o w s u r f a c e Crown Main 5.8 5.7 1.09 3.1 7.9 0.79 Reef & Main Reef Leader Village/ 1.8 6.6 0.39 0.2 13.6 0.10 Robinson Main Reef & Main Reef Leader City Deep 2.9 6.8 0.61 2.4 6.9 0.54 Main Reef & Main Reef Leader Simmer and 1.5 8.8 0.43 0.2 8.2 0.04 Jack Main Reef Leader CMR 2.6 3.7 0.31 0.6 3.7 0.07 Kimberley Reef CMR and 3.7 3.8 0.44 4.3 3.7 0.51 Crown White Reef Dee Main Reef, 58.6 9.6 18.1 45.7 7.3 10.7 per Main Reef 5 5 tha Leader, n South Reef, 900 Pyritic m Quartzites, bel White Reef ow sur fac e Total 1.5 3.6 0.17 87.2 8.3 23.1 57.6 7.1 13.1 5 7 Area December 2010 Resource Statement Indicated Resource Inferred Resource Tonnes Grad Cont Tonn Grad Cont (million) e ent es e ent
(g/t (Oz) (mil (g/t (Oz) ) lion ) ) CMR Main 10.5 5.5 1.84 1.6 9.5 0.48 S Reef & Main h Reef Leader a l l o w e r t h a n 9 0 0 m b e l o w s u r f a c e Crown Main 5.8 5.9 1.10 3.1 8.0 0.81 Reef & Main Reef Leader Village/ 1.8 6.7 0.39 0.2 16.5 0.11 Robinson Main Reef & Main Reef Leader City Deep 2.9 6.8 0.63 2.5 6.8 0.54 Main Reef & Main Reef Leader Simmer and 1.5 8.8 0.43 0.2 8.3 0.04 Jack Main Reef Leader CMR 2.6 3.7 0.31 0.6 3.8 0.07 Kimberley Reef CMR and 3.6 3.8 0.44 4.3 3.9 0.42 Crown White Reef Dee Main Reef, 58.5 9.7 18.2 46.6 7.3 10.8 per Main Reef 2 9 tha Leader, n South Reef, 900 Pyritic m Quartzites, bel White Reef ow sur fac e Total 87.2 8.3 23.3 59.1 7.0 13.3 6 6 * Totals are based on additional decimal points. Rounding from the original reports has created minor inconsistencies with respect to Grade and metal content. NOTE: The information in this statement relating to Mineral Resources and geology has been reviewed and approved by Mr Keith Matier, BSc (Hons), GDE, PrSci Nat, who is a Competent Person in terms of the SAMREC code. Mr Matier is the Geology Manager of Central Rand Gold South Africa (Proprietary) Limited ("CRGSA") and has over 17 years` experience in exploration, mineral resource management and mineral evaluation. The decision to cease making use of the mechanised long-hole stoping mining technique has required that the Company`s Mineral Reserve be revisited. Scoping studies and trial mining using conventional hand-held mining techniques have been completed and appear robust and economic. The Company is currently in the process of updating the Mineral Reserves in line with this new mining methodology and an updated Reserve statement is expected to be completed during the first half of 2012. Surface Exploration Exploration through systematic mechanical trenching and geological mapping and sampling continued throughout 2011, resulting in the identification and delineation of further open pit "Exploration Target" areas within the Mining Right. The table below details the Exploration Target Inventory as at 31 December 2011. The Exploration Target base has been further classified on the basis of proximity to the gold plant, and now also includes an estimate of clean-up residue from the current stockpile areas and spillage areas in the vicinity of the decommissioned Bateman plant. CRG Exploration Target Summary Mining Area Reef Exploration Target Material SLOTS 8 and 9 (Areas within 3km of Plant) Central MR&MRL 2.2-3.1g/t 4,600-12,600 t New Unified MR&MRL 2.4-2.6g/t 10,000-26,000 t Spenser MR&MRL 3.0-3.1g/t 10,000-25,000 t ROM Pad Cleanup Various 1.6-3.2g/t 20,000-50,000 t
SLOTS 5 and 7 (Areas more than 3km from Plant) Slot 5 A White 2.9-3.1g/t 27,000-48,000 t Slot 5 B,C,D White 1.5-1.9g/t 17,000-33,000 t Slot 7 White 2.1-3.2g/t 87,000-200,000 t 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. 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. Further potential not yet tested, and additional to the Exploration Target schedule above, has been identified in the Slot 9 area to the immediate west of the current New Unified operation. Initial exploration has recently been initiated and, if successful, surface operations could continue substantially throughout 2012. Operational update Safety Central Rand Gold has had a proud safety record since its inception. However, safety was more of a challenge in 2011 than in the past, as we suffered five lost-time injuries of which three came from underground operations and two from the metallurgical plant. We have continued to focus on improving our safety standards and awareness through safety programmes, which include daily and weekly safety meetings across the operations and safety awareness throughout the mine. The Company continues to treat safety as a top priority. The following table shows overall safety statistics for 2011 (a more comprehensive safety overview is contained in the Sustainable Development section of this report): Type of injury 2011 2010 Dressing cases 7 20 Lost-time injuries 5 5 Incidents 58 97 Mining Operations The following table shows key mining statistics for 2011 comparing actual statistics and those achieved in 2010. 2011 2010 Difference
Activity Metres Grade Metres (m) Grade Metres (m) Grade (m) g/t Tons (t) g/t Tons (t) g/t Tons (t) Decline 101.3 858.1 (756.8) sinking (m) Waste 861.4 1,266.0 (404.6) Development (m) Footwall 566.2 858.9 (292.7) Development (m) Reef 11.4 1.6 355.0 1.6 (343.6) - Development (m) Total (m) 1,540.3 3,338.0 (1,797.7) Stoping (t) 61,391 2.8 6,073 2.6 55,318 +0.2 Reef 23,979 2.8 33,851 (9,872) Development and Reef Intersection (t) Surface 203,993 3.9 155,435 3.2 48,558 +0.7 Mining (t) Total Tons 289,363 195,359 94,004 Underground mining As mentioned in the March 2011 announcement, the Company commenced the process of ceasing all underground development and production. This was motivated by the then unexplained observation of composite double voids and the high dilution rates experienced with long-hole stoping. In July 2011, the Company commenced with a three month trial of its conventional hand-held stoping methodology, which proved very successful. Conventional mining Approach Conventional stoping is done by means of a series of raises and down dipping panels. This is to allow the miners to always work from supported areas. The ore is pulled through the raises to the draw-points below with scraper winches, and loaded from the draw points into the Articulated Dump Truck ("ADT") by means of a 14 tonne Load Haul Dump ("LHD") truck. Then the ore is carted to the stockpile on surface. Stope support Our stope support system is a combination of 180 mm to 200 mm mine-poles installed 1.5 metre apart on dip and strike and a line of 1.8 metre resin- bolts between each line, also installed at 1.5 metre apart on dip and strike. This has proven to be effective at the current depth of less than 200 vertical metres from surface to effectively hold the hanging-wall. Production Production from conventional stoping amounted to 21,707 tonnes, for the last six months of the year, which was in line with the Company`s planned production targets. The production target for 2012 will be to increase monthly underground production to 12,000 tonnes per month, by the third quarter of 2012. Current underground development has opened up approximately 270,000 tonnes of stoping area, which has provided the mining operations with approximately 12 to 14 months of production without any further underground mine development being required. Surface mining Production from slot mining pits: Pit Tonnes Grade New Unified 102,840 4.15 Spencer 58,970 3.94 Central 42,183 3.36 Total 203,993 3.93 Surface mining performed well during 2011 with an average in-situ (undiluted) grade of 3.9 grams per tonne and an average stripping ratio of 1:9 from January to December 2011, which was below the targeted ratio of 1:11. As at 31 December 2011, between 45,000 tonnes and 114,000 tonnes of material remained in the immediate Slot 8 surface mining area. This material has been trenched, mapped, sampled and assayed for gold, and is estimated to run at grades of between 2.2 grams per tonne and 3.0 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 material will continue to be excavated, blended and processed in the Company`s Carbon-in-Pulp ("CIP") gold recovery plant, with a view to determining mined grades and recoveries, and generating income for the Company. Included in this material is clean-up residue from the current ore stockpile and spillage areas in the vicinity of the decommissioned Bateman concentrator. Defined Exploration Target material lying in close proximity to the process plant is expected to be exhausted by the end of May 2012, and the standing stockpiles of surface material are likely to be fully depleted by the end of June 2012. Exploration is ongoing in areas close to the plant and may result in the discovery of additional Exploration Target material. During 2011, some 203,993 reef tonnes were mined from various pits at Slot 8 and Slot 9. The stripping ratio of 1:9 was achieved against the planned stripping ratio of 1:11. Metallurgical update Internal ore processing The ore processing plant saw a number of significant changes during 2011. In July 2011, a decision was made to turn off the Bateman concentrator plant and process ore exclusively through the CIP circuit. This was essentially an informed economic decision, where the relatively high unit operating cost for the Bateman was compounded by the concentrator`s relatively depressed recoveries, and suboptimal operational availability, brought about by heavy wear on the Vertical Shaft Impactor ("VSI") crusher, through crushing of siliceous underground ore. Plant feedstock during the first six months of 2011 was a blend of underground sulphide ore (15% to 30%) and surface oxide ore (70% to 85%). A total tonnage of 98,578 tonnes was processed through the combined Bateman/CIP configuration between January and June 2011, at a built up feed grade of 2.47 g/t. The latter six months of 2011 saw only the softer surface oxide material being processed solely through the CIP circuit. Production for the period July to December 2011 totalled 65,157 tonnes at a built up grade of 2.26g/t. It should be noted that there was no production during the entire month of October 2011 due to the Section 54 suspension of operations. As predicted, metallurgical recoveries improved substantially from 84% to 95%. A similar dramatic increase in overall availability was also observed. Jan to June July to Dec 2011 Tonnes processed 98,578 65,157 163,735 internally (t) Built up head- 2.47 2.26 2.39 grade (g/t) Residue grade 0.39 0.11 0.28 (g/t) Fine gold 6,376 4,597 10,973 produced (oz) Recovery 84% 95% 89% Availability 81% 92% 86% * Schedule of ore processed at the Company`s metallurgical plant. Outsourced ore processing During 2011, the Company tested a number of tolling operations and scenarios at the neighbouring gold producer, Mintails Limited ("Mintails"). During March and April 2011, approximately 11,700 tonnes of dry oxide ore, at an average grade of 2.7g/t, was treated at Mintails` Mogale facility. During July and August 2011, a further tolling trial of gold bearing residue tailings material, similar to that generated during the initial 2008 and 2009 trial mining periods, was undertaken. Approximately 32,000 tonnes of this sand material, running at an average grade of 1.2g/t, was again trucked to the Mogale facility for toll processing. The decision to suspend the Bateman circuit resulted in the accrual and non- depletion of a substantial stockpile of underground sulphide ore. Much of this ore was sourced from the highly dilutive mechanised operation from the early part of 2011. As a means of generating additional income, a third toll trial, based on underground sulphide material, was initiated in September 2011. By the end of December 2011, approximately 21,000 tonnes of sulphide ore (mainly diluted long-hole stoped ore) running at an average grade of 1.9g/t, had been dispatched to Mintails. With the bulk of the lower grade diluted stockpiles now monetised, tolling focus will shift to treating the high grade ore currently being mined through less dilutive conventional means. Jan to June July to December 2011 Oxide Tailings Sulphide Dry tonnes 11,744 32,133 21,076 64,953 delivered (t) Delivered 2.66 1.15 1.93 1.68 grade (g/t) Fine gold 1,004 1,191 1,308 3,503 produced (oz) * Schedule of tonnage processed at Mintails. The CIP plant is currently operating at full capacity, treating immediately available oxide ore sourced from open pits, stockpile pads and other surface sources. The Mintails sulphide tolling arrangement is envisaged to continue for as long as sulphide material excess to the existing internal milling and leaching capacity is mined from underground operations. Gold production In 2011 it was pleasing to report that the Company increased gold output to 14,856 ounces from 9,321 ounces of gold during 2010. Financial update Results The loss for the 2011 financial year was reduced by 78.0% to US$16.1 million (1.01 cents loss per share) against the prior year`s loss of US$72.1 million (4.51 cents loss per share). This reduced loss is largely attributed to the following factors: Increased gold sales There was a 58.7% higher gold sales volume at 14,793 ounces (2010: 9,321 ounces) predominantly from surface pits with better grades, improved plant availability, higher plant recovery and a stronger average realised Rand equivalent gold price. Gold production capacity was also augmented through toll treatment of excess mine production at Mintails. Increased sundry income This is mainly due to profit on the sale of the Gekko concentration plant, a redundant drill rig, miscellaneous fixed assets and surplus waste rock sales. Reduced operating costs Surface mining Surface mining cash operating costs reduced by 26.0% to an average of US$1,115 per ounce (2010: US$1,519 per ounce) due to the discovery of additional surface materials with better strip ratios, better grades, resized employee headcount, metallurgical process optimisation, and renegotiated material and service contract rates. Underground mining, head office and mine support As was reported in the 2010 Annual Report and the Operational Update of 29 March 2011, due to the uncertainty around the composite double voids, the rising water table and the investigation of a viable alternative mining method, all underground mine development and long-hole stoping was suspended in May 2011. This triggered uncertainty on future cash flows resulting in an impairment write-off of US$44.4 million in 2010. Subsequent to this, a series of cost cutting and turnaround programmes were initiated including the following: * Replacement of Australian-based mechanised mining specialist, Australian Contract Mining ("ACM"), with South-African based contractor, Sekgwa Mining, to conduct conventional mining at much reduced costs and lower dilution. * Resizing through the retrenchment of 116 direct employees, voluntary resignations and freezing of vacancies, reducing total direct headcount from 195 (excluding Non-executive Directors) to 92 (excluding Non- executive Directors). * Renegotiated and reduced key material and services contract rates. * Closure of the Rand Leases office and relocation of head office and mine support to the mine site. * Process improvements to optimise and reduce material consumption e.g. diesel fuel and chemicals. Cash and cash equivalents The cash and cash equivalent balance is reported at US$5.4 million as at 31 December 2011 (2010: US$14.6 million). The lower cash balance is a result of cash out flows including the investment the Company made in the testing of different mining methods; optimisation of processing; underground development up to the end of June 2011; retrenchment packages; foreign currency losses on translation of Rand cash balances; ore stockpile build-up; and the suspension of the Mining Right during October 2011. However, these were mitigated by: * proceeds from the sale of the Gekko plant, mobile mine equipment and waste rock; * restructuring of the rehabilitation guarantee from a cash deposit guarantee into an insurance rehabilitation guarantee; * gold sales from surface materials; * reduced contract rates for key material and service contracts; and * recovery of overdue value-added tax ("VAT") refunds. Prospects Having negotiated a very challenging period in 2011 when the Company`s Mining Right was under threat, it is extremely pleasing to be operating in a much more certain environment in 2012. The focus for the Company during 2012 will be to: * stabilise its current mining operation based on the new mining methodology, building up production to 12,000 tonnes per month by the end of the year. The Company estimates that it has sufficient underground ore available to ensure that decline development only needs to re-commence in 2013; * calculate and report a new reserve base taking into account its new mining methodology. This is expected to be completed by mid-year; * complete a mine scoping study for the Crown Mining Right area to evaluate the financial viability of the area; * explore opportunities with other interested stakeholders and extract value from its extensive Mining Right and prospecting areas; and * submit, and receive approval for, the revised Social Labour Plan and Mine Work Programme from the DMR by the end of June 2012. Thanks Thank you to everyone who has contributed to the Company successfully negotiating another challenging year. All stakeholders have played, and continue to play, a valuable role in Central Rand Gold`s development - this includes Directors, management, staff, suppliers, shareholders and community members. Johan du Toit Chief Executive Officer Statements of Financial Position as at 31 December 2011 Group
2011 2010 US$`000 US$`000 NON-CURRENT ASSETS Property, plant and equipment 3,460 10,022 Intangible assets - - Security deposits and guarantees 273 335 Environmental guarantee investment 4,058 6,163 Loans receivable 8,956 9,830 16,747 26,350 CURRENT ASSETS Security deposits and guarantees 581 4,069 Prepayments and other receivables 5,227 6,626 Inventories 2,306 207 Cash and cash equivalents 5,376 14,624 Non-current assets held-for-sale 2,584 4,074 16,074 29,600 TOTAL ASSETS 32,821 55,950 EQUITY Attributable to equity holders of the parent Share capital 25,604 25,604 Share premium 213,377 213,377 Share-based compensation reserve 28,018 27,925 Treasury shares (6) (6) Foreign currency translation reserve (26,955) (28,322) Accumulated losses (210,897) (226,992)
11,679 29,048 Non-controlling interest - - TOTAL EQUITY 11,679 29,048
NON-CURRENT LIABILITIES Environmental rehabilitation and other 6,038 6,474 provisions Loan payable 8,956 9,830 Operating lease liability - 4 Borrowings - - 14,994 16,308
CURRENT LIABILITIES Trade and other payables 4,382 8,884 Environmental rehabilitation and other - - provisions Taxation payable 1,755 1,704 Operating lease liability 11 - Borrowings - 6 6,148 10,594
TOTAL LIABILITIES 21,142 26,902 TOTAL EQUITY AND LIABILITIES 32,821 55,950 Statements of Financial Performance for the year ended 31 December 2011 Group 2011 2010
US$`000 US$`000 Other income and gains 25,055 11,657 Employee benefits expense (7,851) (10,875) Directors` emoluments (1,078) (1,237) Depreciation and amortisation (3,416) (2,524) Inventory write-down (332) (263) Impairment of assets (470) (44,455) Operating lease expense (533) (1,045) Surface mining costs (19,266) (17,099) Operational expenses (2,332) (718) Other expenses (4,187) (6,554) Operating loss (14,410) (73,113) Interest receivable 1,443 1,512 Finance costs (1,072) (1,015) Foreign exchange transaction (2,056) 1,384 (losses)/gains Loss before income tax (16,095) (71,232) Income tax expense - (840) Loss for the year (16,095) (72,072) Loss is attributable to: Non-controlling interest - - Equity holders of the parent (16,095) (72,072) (16,095) (72,072) Loss per share for loss attributable to the equity holders during the year (expressed in US cents per share) Basic loss per share (1.01) (4.51) Diluted loss per share (1.01) (4.51) Statements of Comprehensive Income for the year ended 31 December 2011 Group 2011 2010 US$`000 US$`000
Loss for the year (72,072) (16,095)
Other comprehensive (loss)/income: Exchange differences on translating (1,367) 1,445 foreign operations Income tax relating to components of - - other comprehensive income Other comprehensive (loss)/income for (1,367) 1,445 the period, net of tax Total comprehensive loss for the period (70,627) (17,462) Total comprehensive loss is attributable to: Non-controlling interest - - Equity holders of the parent (70,627) (17,462) (70,627)
(17,462) Statements of Changes in Equity for the year ended 31 December 2011 Attributable to equity holders of the Parent
Company Group Ordina Share Shar Tre Forei Accu To Non-Total ry Premium e- asu gn mula ta Con Equity Share Base ry Curre ted l tro
Capita d Sha ncy Loss lli l Comp res Trans es ng ensa latio Int tion n ere
Rese Reser st rve ve US$`00 US$`000 US$` US$ US$`0 US$` US US$ US$`000 0 000 `00 00 000 $` `00
0 00 0 0 Balance at - 56,684 31 December 5,023 191,406 27,4 (2) (28,4 (138 56 2009 82 00) ,825 ,6 ) 84 Total comprehensiv e income for the year Loss for the - - - - - (7 - (72,072) year (72, 2, 072) 07 2) (4
6, 33 5) Other comprehensiv e income Foreign - - - - - - 1,445 currency 1,445 1, adjustments 44 5 Transactions with owners, recorded directly in equity Issue of shares: Capital 20,581 21,971 - - 42 42,552 raising ,5 52
Employee Share Option Scheme: Share-based - - - - - 439 payments: 443 (4) 43 Employees 9 and Directors shares and options Balance at - 29,048 31 December 25,604 213,377 27,9 (6) (26,9 (210 29 2010 25 55) ,897 ,0 ) 48 Total comprehensiv e income for the year Loss for the - - - - - (16, (1 - (16,095) year 095) 6, 09 5) Other comprehensiv e income Foreign - - - - - (1 - (1,367) currency (1,36 ,3 adjustments 7) 67 ) (3 4, 44
7) Transactions with owners, recorded directly in equity Employee Share Option Scheme: Share-based - - 93 - - - 93 - 93 payments: Employees and Directors shares and options Balance at 213,377 28,0 (226 11 - 11,679 31 December 25,604 18 (6) (28,3 ,992 ,6 2011 22) ) 79 Statements of Cash Flow for the year ended 31 December 2011 Group 2011 2010 US$`00 US$`000
0 CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax (16,09 (71,232 5) ) Adjusted for : Depreciation and amortisation 2,524 3,416 Bad debts written off - 11 Employment benefit expenditure (Share-based 93 443 payments) (Profit)/loss on disposal and scrapping of 24 property, plant and equipment (991) Impairment of inventory 332 578 Impairment of assets 470 44,455 Net loss/(gain) on foreign exchange 2,056 (1,384) Increase/(decrease) in operating lease 7 (47) liability Sundry income (36) (510) Interest received (1,443 (1,512) ) Finance costs 1,015 1,072
Changes in working capital Decrease/(increase) in prepayments and other receivables 4,887 (1,354) (Increase)/decrease in inventory 1,367 (2,431 ) (Decrease)/increase in trade and other 1,264 payables (4,502 ) Increase in provisions 812 3,461 Cash flows used in operations (12,82 (20,423
7) ) Interest received 395 513 Finance costs (24) (16) Sundry income 581 - Net cash used in operating activities (11,87 (19,926 5) ) (11,87 (19,926 5) )
CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant & equipment (2,387 (20,595 ) )
(2,387 (20,595 ) ) Proceeds from disposal of property, plant & 471 equipment 4,756 Decrease/(increase) in security deposits 1,070 (4,251) Net cash used in investing activities (24,375 3,439 ) (24,375
) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (6) (33) Net proceeds from issue of share capital - 42,552 Net cash from financing activities (6) 42,519
Net decrease in cash and cash equivalents (8,442 (1,782) ) Cash and cash equivalents at 1 January 14,624 15,899 Effects of exchange rate fluctuations on cash 507 balances (806) Cash and cash equivalents at 31 December 5,376 14,624 Basis of preparation and general information 1. General information These are the non-statutory financial statements, extracted from the Group annual financial statements for the year ended 31 December 2011. Central Rand Gold Limited ("Central Rand Gold") is a Guernsey incorporated company and it is also registered in South Africa as an external company. One of its subsidiaries, Central Rand Gold (Netherland Antilles) N.V. ("CRGNV"), was incorporated in the Netherlands Antilles. Central Rand Gold`s operating subsidiary is Central Rand Gold South Africa ("CRGSA"). Central Rand Gold has a primary listing on the London Stock Exchange ("LSE") and a secondary listing on JSE Limited ("JSE"). Legally, Central Rand Gold complies with the company laws of its place of incorporation being Guernsey and the company laws of the place of its external registration being South Africa. One of its subsidiaries, CRGNV, is incorporated in the Netherlands Antilles, therefore the Group is also impacted by the company laws of the Netherlands Antilles. The Group`s annual financial statements for the year ended 31 December 2011 were approved for issue on 30 March 2012. The auditor has issued his opinion on the Group`s financial statements for the year ended 31 December 2011 which is unqualified but does contain an emphasis of matter paragraph in respect of the matters referred to under note 2 `Going concern` and is available for inspection at the Company`s registered address. Emphasis of matter - Going concern In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures set out in note 1.1 to the financial statements concerning the Group`s ability to continue as a going concern which depends, in particular, upon a satisfactory outcome of the rising water table issue, and the availability of funding, which is required to be able to restart mine development operations. These factors, together with the other matters explained in note 1.1, indicate the existence of material uncertainties that may cast significant doubt on the Group`s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. 2. Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations (collectively "IFRS") issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("EU"). 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 In March 2011, the Group announced the results of its operational and strategic review which considered the challenges facing the Group. Since then significant progress has been made on many of the problems facing the Group: - Following the cancellation of the Group`s New Order Mining Right in September 2011, the decision to cancel was temporarily suspended in October 2011 and the Group`s Mining Rights were officially restored in December 2011. - A double void study was completed that confirmed that the incidence of composite double voids was limited to specific areas and conditions and that general prediction of their occurrence would be possible. The study also revealed that the combined impact of double voids would not have a material effect on the Main Reef Mineral Resource base. - As a result of the high dilution resulting from the collapse of the hanging wall of the Main Reef Leader, long-hole stoping and mechanical mining were suspended. Since then a proven, conventional mining method has been adopted with four months of steady-state, cash positive production. - The Group has also scaled back its head count to minimal levels of staff to reflect the current levels of operation. While significant progress has been made in stabilising the operations, challenges remain as detailed below. Rising water table The water table in the Central Rand Basin is rising. It is imperative that the water table is kept 250 metres below surface for the mine to retain access to its reserves and resources and hence be able to reach full sustainable production. A proposed solution to the Acid Mine Drainage ("AMD") problem was presented to the Portfolio Committee on Water and Environmental Affairs on 7 September 2011 and Trans Caledon Tunnel Authority was appointed on that date as implementing agent by the Minister of Water Affairs. While the Directors remain confident that the South African Government will commit in time to prevent AMD reaching the surface, there remains uncertainty over the timing of the implementation of the proposed solution. If the rising water table problem is resolved, the Group will require further funding to develop the mine and gain access to the underground ore (see below). Current and projected funding requirements At 31 December 2011, the Group had cash of US$5.4 million. At 29 February 2012, the Group had cash of US$5.8 million, the increase resulting from continued cash positive conventional mining in the first two months of 2012, (albeit without any underground development of the mine). The Directors have prepared cash flow projections until 2020 that reflect the current mine plan adopted by the Directors. 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. The current mining activities are forecast to keep cash levels broadly flat over the next 18 months by continuing to process surface ore and mining the currently accessible underground ore. The current plan assumes the resolution of the rising water table problem and so retaining full access to the reserves and resources. In order to develop the mine to gain access to the underground ore and increase production beyond what is achievable over the next 18 months, further funding would be required in the last quarter of 2013. However, the timing of the resolution of the water table problem and the timing of fundraising will determine whether the Group is able to follow the current plan beyond the last quarter of 2013. In addition, the risk 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 key assumptions such as the gold price, exchange rate, mining production and the metallurgical recovery and production rates. Conclusion During 2011, the Group made considerable progress in resolving the issues that led to the strategic review in March 2011. The Directors have now stabilised the operations. The stabilising of the operations is an essential part to getting the business ready for a potential capital raise in the future and to achieving long-term sustainable production. Nevertheless, the Group remains exposed to external factors which could disrupt the business. The continued uncertainty around the timing of the resolution of the rising water table problem, together with the need for additional fund raising required by the current mine plan in the last quarter of 2013, are material uncertainties that may cast significant doubt on the Group`s ability to continue as a going concern and it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business. Nevertheless, after taking account of the Group`s funding position and its cash flow projections and having considered the following: - the risks and uncertainties associated with these projections; and - the current trading position which has not provided the Directors with any evidence that their assumptions for the next 18 months are not achievable. The Directors have a realistic expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements. For these reasons, they continue to prepare the financial statements on a going concern basis. These financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate. 3. Accounting policies The accounting policies have been consistently applied to all years presented. (a) New and amended standards adopted by the Group The Group has adopted the following new and amended IFRSs as from 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 unreplaced 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. (b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group A number of standards and amendments to existing standards have been published and are mandatory for the Group`s accounting periods beginning on or after 1 January 2012 or later periods, but the Group has not early adopted them. IFRS 7: Financial instruments: Disclosures - transfers of financial assets The amendment to IFRS 7 will be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2012. In terms of the amendment, additional disclosure will be provided regarding transfers of financial assets that are: (i)not recognised in their entirety; and (ii) derecognised in their entirety but for which Central Rand Gold retains continuing involvement. IFRS 9: Financial instruments: Classification and measurement The amendment to IFRS 9 is expected to be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2013. The standard will be applied retrospectively, subject to transitional provisions. The standard has not yet been endorsed by the EU. IFRS 9 addresses the initial measurement and classification of financial assets and will replace the relevant sections of IAS 39. Under IFRS 9 there are two options in respect of classification of financial assets, namely, financial assets measured at amortised cost or at fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows and when they give rise to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets are measured at fair value. Additions to IFRS 9 The additions to IFRS 9 are expected to be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2015.The standard will be applied retrospectively, subject to transitional provisions. The additions to IFRS 9 have not yet been endorsed by the EU. Under IFRS 9 (2010), the classification and measurement requirements of financial liabilities are substantially the same as per IAS 39, barring the following two aspects: (i)Fair value changes for financial liabilities (other than financial guarantees and loan commitments) designated at fair value through profit or loss, attributable to the changes in the credit risk of the liability, will be presented in other comprehensive income. The remaining change is recognised in profit and loss. However, if the requirement creates or enlarges an accounting mismatch in profit or loss, then the whole fair value change is presented in profit or loss. The determination as to whether such presentation would create or enlarge an accounting mismatch is made on initial recognition and is not subsequently reassessed. (ii) Under IFRS 9 (2010), derivative liabilities that are linked to and must be settled by delivery of an unquoted equity instrument whose fair value cannot be reliably measured, are measured at fair value. IFRS 9 (2010) incorporates the guidance in IAS 39 dealing with fair value measurement. IFRS 10: Consolidated financial statements The amendment to IFRS 10 will be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2013. Retrospective application is generally required in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, an entity is not required to make adjustments to the accounting for its involvement with entities that were previously consolidated and continue to be consolidated, or entities that were previously unconsolidated and continue not to be consolidated. IFRS 10 prescribes modified accounting on its first application in the following circumstances:(i) An entity consolidates an entity not previously consolidated. (ii) An entity no longer consolidates an entity that was previously consolidated. (iii) In relation to certain amendments to IAS 27 made in 2008 that have been carried forward into IFRS 10. IFRS 12: Disclosure of interests in other entities IFRS 12 will be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2013. IFRS 12 requires the disclosure of information that enables users of financial statements to evaluate: (i)the nature of, and risks associated with, its interests in other entities; and (ii) the effects of those interests on its financial position, financial performance and cash flows. IFRS 13: Fair value measurement IFRS 13 will be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2013. IFRS 13 seeks to increase consistency and comparability in fair value measurements and related disclosures through a `fair value hierarchy`. The hierarchy categorises the inputs used in valuation techniques into three levels. The hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. IAS 1: Presentation of financial statements The amendments to IAS 1 are expected to be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2013. The amendments revise the way other comprehensive income is presented. IAS 12: Income taxes The amendment to IAS 12 is expected to be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2012. The amendment provides a solution to whether an entity expects to recover the carrying amount of the asset through use or sale by introducing a presumption that recovery of the carrying amount will, normally, be through sale. IAS 19: Employee benefits The amendments to IAS 12 are expected to be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2013. The amendments: (i)require recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements; (ii) introduce enhanced disclosures about defined benefit plans; (iii) modify accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits; and (iv) clarify miscellaneous issues, including the classification of employee benefits, current estimates of mortality rates, tax and administration costs and risk-sharing and conditional indexation features. IAS 27: Consolidated and separate financial statements IAS 27 is expected to be adopted by Central Rand Gold for the first time for its financial reporting period ending 31 December 2013. The standard was reissued as IAS 27 Separate Financial Statements. Consolidation requirements previously forming part of IAS 27 (2008) have been revised and are now contained in IFRS 10 Consolidated Financial Statements. The impact on the financial statements for Central Rand Gold has not yet been estimated. Other amendments to standards effective on or after 1 January 2012 are not expected to have a material impact on the Group. 4. Estimates The preparation of the financial statements requires the Group`s management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires the exercise of judgement based on various assumptions and other factors such as historical experience and current and expected economic conditions. Actual results may differ from these estimates. 5. Financial risk management The Group`s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including currency risk, interest rate risk and gold price risk). The Group`s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group`s financial performance. The Board monitors this risk management process. Foreign Currency Rates The US Dollar rates of exchange applicable to the year are as follows: Year ended 31 December Year ended 31
2011 December 2010 Closing Average Closing Average South African 0.15090 0.13721 0.13482 0.12057 Rand Pound Sterling 1.54710 1.54633 1.59257 1.56593 6. Property, plant and equipment Property, plant and equipment transferred to non-current assets classified as held-for-sale amounts to US$3,856,619 and relates to gold processing equipment. 7. Environmental guarantee investment In 2011, the Company restructured from a cash environmental guarantee to an insurance guarantee investment. The policy was entered into on 1 May 2011 which covers the Company for a total amount of US$5,031,573 (ZAR40,840,689) in the event of an environmental rehabilitation program. 8. Non-current assets held for sale At 31 December 2010, the Group classified the Gekko 50 tonne per hour processing plant as non-current assets held-for-sale. During the period, the Group disposed of the Gekko 50 tonne per hour for US$3,754,890. Items of plant and machinery, being the Bateman plant, the Optical Ore Sorter, the Gekko 20 tonne per hour processing plant, the Sandvick jumbo and the GIA charger have been classified as held-for-sale during the period. The value of the asset is now expected to be realised from the sale of the asset rather than the continuing use. At year-end, the Group valued the Bateman plant at US$1,424,809, the Optical Ore Sorter at US$584,217, the Gekko 20 tonne per hour plant at US$103,094, the Sandvick jumbo at US$287,307 and the GIA charger at US$184,800. The value of assets transferred to non-current assets held-for-sale is US$3,416,520 at 31 December 2011. Based on management`s estimate of the fair value to be obtained from the sale, the asset held-for-sale has been impaired by US$939,505 to its fair value less costs to sell. 9. Loans receivable 9. Loans receivable Group 2011 2010 US$`000 US$`000 At 1 January 9,830 7,818 Interest for the year 1,048 999 Effect of movements in exchange (1,922) 1,013 At 31 December 8,956 9,830 Puno Loan Agreement, a further loan of ZAR39,068,963 (US$5,782,207) to Puno Gold Investments Proprietary Limited ("Puno").The loan bears interest at South African prime lending rate plus 2% and is payable as and when free cash flows as determined by the Board of CRGSA are available. During 2007, a dispute arose between the shareholders of CRGSA in regard to the allocation of intercompany loans which fund the budget and work programme and the incurring of, and level of, certain costs by CRGSA. Subsequently, on 16 February 2009, CRGNV, the direct holding company of CRGSA, exercised the call option granted to it in terms of the shareholders` agreement and gave Puno 90 days` notice to acquire Puno`s entire interest in CRGSA ("the call"). During April 2009, Puno made an urgent application to the South Gauteng Division of the High Court of South Africa to interdict CRGNV from proceeding with the call pending the final determination by arbitration of the validity and enforceability of: (1) the various funding calls made by CRGSA and the consequent call; and (2) the interpretation of the shareholder funding provisions of the shareholders` agreement. The parties agreed that the matter would proceed to arbitration as sought in the application. Puno, in its capacity as claimant in the matter delayed and ultimately failed to bring the matter before the Arbitration Foundation of South Africa ("AFSA") and, consequently, in an effort to expedite matters, CRGNV and CRGSA approached AFSA as respondent requesting that an arbitrator be appointed and that arbitration proceedings commence. In response to this request during September 2010, AFSA advised the Company that it would indeed appoint an arbitrator and Judge Lewis Goldblatt was subsequently appointed. During October 2010, however, Judge Goldblatt found that the matter could not proceed to arbitration as the matter was not brought before him by the claimant in the matter ("Puno") but rather was sought to be brought by the respondent ("Central Rand Gold"). Following from this finding, Puno has indicated its intention to challenge the validity and constitutionality of the CRGSA shareholders` agreement despite having based various of its court applications thereon - including the application brought in the South Gauteng High Court, Johannesburg, South Africa, against CRGNV, the Company and CRGSA, in which it sought to interdict CRGSA from proceeding with mining operations pending an arbitration award or court order on the proper interpretation of clause 18 of the CRGSA shareholders` agreement. This ultimately failed as the court found that Puno had failed to make out a case for the relief sought on each and every ground which formed the subject of the application hearing. In an effort to bring this matter to finality, various alternatives are now being investigated, amongst them being: (i) methods in which Central Rand Gold itself can commence arbitration proceedings; and (2) various other non-arbitration-based methods to conclude the dispute between the CRGSA shareholders. It should be noted, however, that in the event that the matter not be successfully brought to arbitration or resolved by other means, CRGNV will not be able to introduce a new BBBEE-compliant partner who the Directors believe will be more beneficial for the Group as a whole. Despite the above, the Directors remain confident of success and further believe that the return of the shares by Puno will not have any material consequences in respect of the consolidated accounts of the Group as the 26% shareholding will be held in trust pending the outcome of discussions relating to new BEE arrangements. Notwithstanding this position, we have, pending the outcome of any dispute, allocated 100% of the intercompany balances directly from the Company to CRGSA. This additional 26% of intercompany debt excluding interest amounts to ZAR15,852,103 (US$2,204,552) between 1 January and 31 December 2011 and ZAR75,913,440 (US$10,416,083) between 1 January and 31 December 2010, and ZAR295,947,734 (US$39,899,673) prior to 1 January 2010. 10. Prepayments and other receivables Prepayments contains US$3,627,561 (ZAR29,444,487), which relates to the cost of acquiring the submersible water pumps that are required to stop the rising water table in the Central Basin. Group 2011 2010
US$`000 US$`000 11. Inventories Current Consumables 339 59 Ore stockpiles 1,967 125 Stationery and office consumables on hand - 23 Total inventories 2,306 207 The amount of the write-down of ore stockpiles to net realisable value, and recognised as an expense is US$332,335 (2010: US$263,451). 12. Directorate During the current year, the composition of the Board of Directors changed. Two Directors of the Group, Mr N. Farr-Jones and Mr J. Brauns, resigned on 24 June 2011. 13. Commitments Group 2011 2010 US$`000 US$`000
a) Various contractual amounts payable Fees payable to iProp Limited for 500 500 prospecting Fees payable to Sekgwa Mining 2,145 - Services Proprietary Limited for underground mining services Fees payable to Stallion Security 501 501 Proprietary Limited for security services Fees payable to the Department of - 2 Mineral Resources within one year Plant and equipment contracted for 458 6,517 b) Donations payable Donations payable to Umkhonto we - - Sizwe Military Veterans Association (MKMVA) 14. 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. 15. Share-based payments Grant of options in the Company During the year, further share options were granted to selected employees. The options granted are summarized below: Vesting Strike Price Allocation 6,000,000 on 8 November 2012, Exercise Mr S.J. du 6,000,000 on 8 November 2013 and price Toit 6,000,000 on 8 November 2014. escalates in accordance with the vesting tranches.
One third at price of GBP0.01, one third at
GBP0.015 and one third at GBP0.0225. 3,800,000 on 8 November 2012, Exercise Mr P. 3,800,000 on 8 November 2013 and price Malaza 3,800,000 on 8 November 2014. escalates in accordance with the
vesting tranches. One third at price of
GBP0.01, one third at GBP0.015 and one third at
GBP0.0225. 10,000,000 on 8 November 2012, Exercise Executive 10,000,000 on 8 November 2013 and price Management 10,000,000 on 8 November 2014. escalates in accordance with the vesting tranches.
One third at price of GBP0.01, one third at
GBP0.015 and one third at GBP0.0225.
Total 16. Related parties Except for the information disclosed in Note 15 Share-based payments above, no other disclosable related party transactions occurred in the period. 17. Events occurring after balance sheet date No material changes, other than those highlighted in this report, have occurred in the affairs of the Group between the end of the financial year and the date of this report. Issued on behalf of: Central Rand Gold Limited Date: 2 April 2012 Date: 02/04/2012 10:02:05 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.

Share This Story