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INTERIM MANAGEMENT STATEMENT AND COMPETENT PERSON’S REPORT ON CMR EAST
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 AND COMPETENT PERSON’S REPORT ON CMR EAST
1. Summary
- Probable Reserves increased by 312,800 ounces (“oz”) to 719,700 oz;
- Independent Competent Person’s Report (“CPR”)completed for CMR East,
increasing the value of the Company by $70 million;
- Underground production achieves target of 12,000 tonnes per month
(“tpm”);
- 200,000 tonnes of additional underground ore identified, which can be
accessed through minimal on-reef development;
- Underground mine call factor at 57% for third quarter sulphide
transition, which is below the long term target of 85%. October 2012
mine call factor at 70% shows steady improvement. Strategies are in
place to further reduce gold losses;
- Low gold production of 2,600 oz for the quarter, due to low
metallurgical recovery in July 2012 and mill stoppages in August 2012
primarily as a result of the transition from processing of oxide to
sulphide ore;
- Metallurgical plant has been modified to accept 100% hard underground
sulphide material with capacity to achieve similar high tonnage
throughputs to that seen with the soft oxide feed that characterised
the first six months of 2012;
- The Company expects full year gold production to be similar to the
prior year figure of between 14,000 oz and 15,000 oz;
- Approval given by the South African Department of Water Affairs to
Trans Caledon Tunnel Authority (“TCTA”) to commence construction of
the High Density plant in the Central Basin to stop current rise in
the water table. The agreement between Central Rand Gold and TCTA,
which will allow Central Rand Gold to dewater the Central Basin below
the Environmental Critical Level (“ECL”) - which is approximately 225
metres below surface (“mbs”), at Central Rand Gold mining operations,
will be signed before the end of November 2012; and
- Awaiting court date to commence the resolution of BEE dispute.
2. Operational update
2.1. CMR East Reserve Conversion and Competent Person’s Report
Following from the successful reserve conversion of Main Reef resources
underlying the CMR West mining area, a further pre-feasibility study was
undertaken during the third quarter of 2012 focussing on the adjacent CMR
East area.
Whilst the Main Reef underlying the CMR East is somewhat lower in grade
relative to the current CMR West operation, the results of the economic
study are positive and allow for a higher tonnage and longer operating
life of the combined CMR mine.
Venmyn Rand Proprietary Limited, the authors of the March 2012 Competent
Persons Report (published on the Company’s website in June 2012), were
again requested to independently review and ratify the Reserve study and
further to place an independent monetary value on the impact of the
additional Reserves on the combined operation.
The Company is pleased to announce that the inclusion of the CMR East
area has increased the Company’s Probable Reserves by 312,800 oz to a
combined total of 719,700 oz which, in the process, has added a further
$70 million to the Preferred Value of the combined mining operation.
Vertical
Site Depth Category Tonnage Grade Content
Probable
CMR West 450m Reserves 3,553,000 3.56g/t 406 900 oz
Probable
CMR East 450m Reserves 3,790,070 2.57g/t 312 800 oz
Total 7,343,000 3.05g/t 719 700 oz
These published reserves are fully compliant with the South African Code
for Reporting of Exploration Results, Mineral Resources and Mineral
Reserves (“SAMREC Code”).
The Reserve update is based on a combined mining operation designed to
exploit the Main Reef underlying the CMR area to a depth of 450m below
surface. The underground portal, ventilation and general infrastructure
established for the CMR West operation will be sufficient to support the
combined operation.
The additional tonnage generated through the simultaneous extraction of
CMR East and West reserves will however require a more significant
processing plant upgrade that previously planned.
A combined capital cost of approximately $33 million has been budgeted
which will allow for the expansion of the processing plant and further
infrastructure as well as allow for sufficient capital development to
access underground reserves.
The additional reserves identified in the CMR East area have the
following benefits:
- The combined operation builds up to a maximum steady state
production rate of between 70,000 oz to 80,000 oz per annum, an
increase of 33% from the original CMR WEST study;
- The overall life of mine is extended to 2024; and
- The CMR Main Reef project area Net Present Value is increased from
$117 million to $245 million.
The CPR also included an update from the March 2012 CPR of the asset
value of the CMR Main Reef. This valuation is fully compliant with the
South African Code for the Reporting of Mineral Asset Valuation (SAMVAL
Code.)
As with the previous CPR, the valuation was undertaken using two separate
methodologies, and the average of the two then accepted as the “preferred
value”. It is important to stress that this current valuation only
considers the CMR project area’s Main Reef resource to a depth of 450m.
It does not include Main Reef Leader, White Reef or Kimberly Reef
resources.
Market Preferred
Comparative Value
(Resource/Reserve Discounted Cash
$/oz) Flow
March 2012 $119m $117m $117m
October
2012 $128m $245m $186m
The full Competent Person’s Report is available on the Company’s web site
www.centralrandgold.com.
2.2 Additional Open Pit Target Areas
The Company is pleased to announce the identification of an additional
open pit target area situated within a three kilometre radius of the
existing operation.
This area, known as the AVON project, sits within the Langlaagte/Crown
West portion of the existing mining right. Thirty six trenches spaced
approximately 50m apart were mechanically excavated to a depth of
approximately 5m, exposing both the Main Reef Leader and Main Reef
horizons. These trenches were then geologically mapped and systematically
channel sampled and finally assayed for gold.
The results of assaying the trench samples have allowed for the
identification of potentially economically mineable areas, the results of
which are compiled and tabulated below.
Vertical
Site Depth Category Tonnage Grade
Open Pit Exploration 7 to
Avon West 3 10m Target 3,000 to 6,000t 9g/t
Open Pit Exploration 3 to
Avon East 1 38m Target 50,000 to 60,000t 3.5g/t
Open Pit Exploration 2 to
Avon East 2 12m Target 12,000 to 19,000t 2.8g/t
Open Pit Exploration 2.5 to
Avon East 3 38m Target 60,000 to 70,000t 3.5g/t
2.7 to
Total 125,000 to 155,000t 3.6g/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 and it is uncertain if further
exploration will result in the definition of a Resource.
Further exploration work, which includes trial mining and processing of
this shallow target to establish grade and orebody continuity,
mineability, dilution and throughput characteristics, is ongoing.
2.3 Mining
2.3.1 Underground Mining
Quarterly underground production results
2012 Actual trammed Planned CPR Difference Planned grade
tonnes trammed tonnes (g/t)
1st Quarter 18,275 20,167 -1,892 4.90
2nd Quarter 26,691 28,050 -1,359 4.50
3rd Quarter 34,205 34,933 -728 5.10
Total Tonnes 79,171 83,150 -3,979 4.80
Using conventional hand held stoping methodology, 34,205 tonnes of ore
was mined in the third quarter, which was largely in line with the
Company’s production targets. Based on variable hanging wall conditions,
the Company decided to increase its underground support methodology by
including 75cm by 75cm timber packs as the standard stope support
requirement in order to increase area coverage of the hanging-wall,
thereby minimising the possibility of ground failure and improving the
safety of employees on the face.
Current production performance has given the Company confidence to
increase its underground production target to 14,000 tpm during the
fourth quarter of 2012.
The Company estimates that it still has approximately 347,000 tonnes of
in-situ ore available that can be accessed requiring only minimal on-reef
development.
2.3.2 Surface Mining
Open pit production situated at Slot 8, being the New Unified Pit and
Spencer Pit, were stopped in August 2012 as these pits were getting
deeper and the ore-bearing body becoming harder. This resulted in the
pits becoming un-economical and surface operations in the area were
subsequently ceased.
Rehabilitation of the open pits continues, with almost $200,000 spent
during the quarter, as part of restoration of the area to its previous
state and also the reduction of Central Rand Gold’s surface
rehabilitation liability.
Quarterly surface mining production results
2012 Actual tonnes CPR planned Difference Planned grade
tonnes (g/t)
1st Quarter 36,221 35,000 1,221 3.67
2nd Quarter 38,017 34,500 3,517 2.59
3rd Quarter 7,488 20,500 -13,012 2.60
Total 81,726 90,000 -8,274 3.07
Tonnes
2.3.3 Gold mining efficiency and Mine Call Factor
The commencement of treatment and processing of large quantities of
underground ore in the third quarter has allowed the Company, for the
first time, to assess the Mine Call Factor (“MCF”) attributed to the
underground mining operation.
The MCF measures the incurred unplanned dilution and gold losses
experienced from the mining face to the gold plant. In short, it can be
described as a measure of gold expected (less metallurgical efficiency)
against gold actually delivered.
The MCF for the third quarter was measured at approximately 57%,
resulting in a lower than planned (2.50g/t) milled head grade of 2.15g/t.
The Company’s has a long term target MCF of 85%. Three main factors have
been identified as contributors to this gold loss:
- Fine gold lost during blasting operations as gold particles
liberated from the insitu conglomerate matrix and through the
normal course of mine cleaning;
- Dilution from historical hanging-wall beams reporting to the reef
stockpile;
- Losses of fine gold further liberated from conglomerate matrix
within the surface crushing process prior to the material entering
the gold plant.
It is important to note that with the exception of dilution from the
hanging-wall, the gold is not necessarily completely lost but rather its
final recovery is deferred to later stage clean-up and vamping cycles.
The aforementioned factors are not unique to the Central Rand Gold
operation and are common in all South African gold operations. They arise
from the specific nature and deportment of gold within the Witwatersrand
reefs.
Gold losses in each of these areas have been addressed as follows:
- Regular monthly draw point and sump clean-ups are now undertaken;
- Strict dilution control has been established with aggressive waste
sorting both underground and on surface taking place;
- The crushing process has been adjusted to remove several of the
handling stages with longer term plans to fully automate the
crushing process. Stockpile Run of Mine pad clean-ups are planned
on a quarterly basis to recover liberated fine gold.
It is anticipated that these measures will improve the underground MCF
beyond its long term sustainable target of 85%. This is further evidenced
by the MCF increasing to 70% for the October month.
2.4 Metallurgy
2.4.1 Metallurgical Situation Report
The third quarter of 2012 represented a critical juncture for the
Company. Since inception, the Company has mined and processed
predominantly soft low grade oxide ore obtained from various free digging
open pit operations.
The longer term goal of the Company, however, has always been to mine and
process the harder, higher grade sulphide ore sourced from its
underground operations. Until recently, the Company has not been in a
position to process this underground ore in any appreciable quantity due
to hard rock crushing limitations and has relied mainly on costly
external tolling arrangements to monetise this production.
Towards the end of the second quarter of 2012, the oxide reef that
provided such an important source of economic ore became exhausted
because the pits reached depths where harder sulphide ore prevented free
digging operations.
The existing crusher train was successfully upgraded in May 2012 to allow
for fine crushing of hard sulphide ore as primary mill feedstock, with
the first 100% sulphide feed being introduced to the milling and leach
circuits in July 2012.
As previously reported, internal production in July 2012 was negatively
impacted by modifications required to transition the metallurgical plant
to process predominately the harder sulphide ore. Further production loss
was incurred in August 2012 due to unplanned maintenance being required
for both production mills, which resulted in the Metallurgical plant
being shut down for a four week period. Both mills were back to full
production at the end of the first week of September 2012.
Toll treatment of sulphide ore during August 2012 was accelerated to make
up for the production downtime. The process plant was brought back online
at the end of August 2012, fully equipped and ready to process up to 100%
sulphide feed at similar high tonnage throughputs to that seen with the
soft oxide feed that characterised the first six months of 2012 to
between 17,000 and 20,000 tpm. Management believe that the plant is now
correctly configured to efficiently process all types of material mined
by the Company and September 2012 saw a dramatic increase in grade, gold
recovery and tonnage throughput.
Internally processed tonnage reduced by 4% from 56,086 tonnes processed
in the second quarter to 31,141 tonnes in the third quarter. As a result,
internal gold production during the third quarter dropped by 53% from
3,045 oz to 1,437 oz.
Quarter Quarter
1 2 July August September Quarter3
Tonnes Processed
(t) 42,205 56,086 10,561 2,765 17,815 31,141
Oxide Feedstock
(%) 100% 79% 62% 86% 43% 53%
Belt Grade (g/t) 2.70 2.04 1.63 1.86 2.51 2.15
Residue Grade
(g/t) 0.11 0.10 0.10 0.17 0.19 0.16
Fine Gold
Produced (oz) 3,031 3,045 383 72 982 1,437
External Tolling
(t) 16,076 12,043 0 9,518 7,777 17,295
External Tolling
(g/t) 2.52 2.11 0 2.15 2.02 2.09
Fine Gold
Produced (oz) 1,750 420 0 658 505 1,163
Total Fine Gold
Produced (oz) 4,781 3,465 383 730 1,487 2,600
2.5 Financial Update
Cash and cash equivalents at 30 September 2012 are reported at
US$4.5 million compared to US$6.4 million at end June 2012.
Higher than anticipated cash burn during the three-month period ended
September 2012 is mainly attributed to lost production during the
process plant repair and upgrade during July/August 2012, increased
underground support costs, lower surface grades and higher toll treatment
costs.
These adverse factors were mitigated by stronger realised average Rand
gold prices and reduced head office overheads.
As a result of low gold production in the third quarter, cash operating
cost per oz increased to US$2,585/oz in comparison to US$1,185 in the
first half of June 2012. Year to date September 2012 cash operating costs
averaged at US$1,514/oz. The Company’s year to date all-in cash operating
cost per oz has increased to US$1,889/oz. This is an increase from the
first half of the year’s performance of US$1,563/oz.
As a result of improvement initiatives being implemented on underground
grade protection, increased plant capacity, newly opened surface
resources and increased capability to process hard rock sulphides, the
Company expects full year gold production to be similar to the prior
year’s figure of 14,856 oz.
2.6 Acid Mine Drainage
All terms within the memorandum of agreement have been accepted by
Central Rand Gold and TCTA, and will be signed before end November 2012.
This agreement will see Central Rand Gold contributing the Ritz pumps,
acquired in 2010, in the form of a donation, towards the AMD project.
This contribution will allow Central Rand Gold to de-water the Central
Basin below ECL, at the incremental operational cost.
On 16 October 2012, the South African Department of Water Affairs
announced that TCTA had been given the authority to award the contract
for the construction of the new High Density Sludge Plant for the Central
Basin. Construction is expected to take around 10 months to complete. The
rate of rise in the Central Basin has remained constant at around
0.3 metres per day. It is currently anticipated that ECL will be breached
in September 2013.
2.7 South African mining industry labour disputes
The Company has noted the recent unrest and labour disputes within the
South African mining industry as a whole and has been fortunate not to
experience similar unrest in its operations. Nonetheless, the Company
will maintain a close watch on further developments in the industry and
intends to implement all reasonable mitigating measures that may be put
in place to reduce the likelihood of similar disturbances being
experienced at its operations.
2.8 Arbitration Proceedings
The Company and Puno Gold Investments Proprietary Limited (“Puno”) have
jointly approached the Deputy Judge President of the South Gauteng
Division of the High Court of South Africa in order for a Court date to
be confirmed to commence the resolution of the dispute between the
Company and Puno. Details of this date have yet to be confirmed and
shareholders will be kept informed of developments.
2.9 Goldplat exploration activities
Due diligence is continuing based on an agreement with Goldplat Recovery
Proprietary Limited (“Goldplat”) of two of the shallow shafts at the
Crown East and CMR Bird Reef mines. Goldplat has confirmed that it will
no longer pursue the CMR Bird Reef as this area is at shallow levels and
not economically viable. All attention has now moved to the Crown East
area, where Goldplat continues to establish an on surface access that
will provide access to the main reef and main reef leader Reserves.
Progress is slower than originally anticipated due to poor ground
conditions at shallow depths.
2.10 Prospecting and Mining Rights
Central Rand Gold was recently informed that the application for
extension of its AngloGold prospecting right was not received on time and
has therefore lapsed. The AngloGold prospecting right is not a material
component of the Company’s prospecting area, as the resource only starts
at around 700 mbs and the area does not, at this stage, have any
reportable resources in the Company’s resource table. The South African
Department of Mineral Resources has, however, informed the Company that
it would be entitled to make application for a new prospecting right over
this area. This will give the Company an additional five years to
prospect over this area.
The Company has received legal opinion on this matter as it believes it
has sufficient evidence that a submission was made within the required
timeframe. The Company has reserved its legal rights, but has decided to
take the advantage of the additional timeframe afforded by a new
prospecting right.
Further feedback has been received from the DMR that the City Deep area
has been included in the Mining Right granted to Ferreira Estate and
Investment Company Limited, a subsidiary of the South African operating
subsidiary, CRGSA. The Company is pleased to finally receive this
confirmation and will shortly commence with operations in this area.
2.11 Final Quarter 2012 outlook
The third quarter performance was negatively impacted by the plant break
down and a disappointing MCF resulting in a lower than planned head grade
of 2.15g/t. This largely contributed towards the high cost per oz and
negative cash movement for the quarter, which the Company recognises is
unsustainable.
The objective for the Company during the fourth quarter is to protect and
restore the Company’s cash position. The focus will be on ensuring
improved metallurgical plant availability, a higher MCF to enable the
Company to achieve an average milled head grade of 2.5g/t and achieving
its mine production targets.
For further information, please contact:
Central Rand Gold +27 (0) 87 310 4400
Johan du Toit / Patrick Malaza
Charles Stanley Securities Limited +44 (0) 20 7149 6478
Marc Milmo / Mark Taylor
Merchantec Capital +27 (0) 11 325 6363
Monique Martinez / Marcel Goncalves
Buchanan +44 (0) 20 7466 5000
Bobby Morse / Louise Mason
Jenni Newman Public Relations +27 (0) 11 506 7351
Proprietary Limited
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 19 years’ experience in precious metal
exploration, mineral resource management and evaluation.
12 November 2012
Johannesburg
JSE Sponsor
Merchantec Capital
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