GREAT BASIN GOLD LIMITED - Q3 September 2012 results

Release Date: 15/11/2012 15:25
Code(s): GBG
 
Wrap Text
Q3 September 2012 results

GREAT BASIN GOLD LIMITED
(Incorporated in Canada and registered as an External Company in South Africa)
(Registration No. 2006/021304/10)
Share Code: GBG ISIN Number: CA3901241057
("Great Basin" or "the Company")




CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012
Unaudited)
(Expressed in thousands of Canadian Dollars, unless otherwise stated)


                                      

Consolidated Statements of Loss
Expressed in thousands of Canadian dollars, except per share data
                                                                                 Three months ended      Nine months ended
                                                                                        September 30          September 30
                                                                                    2012       2011        2012      2011
                                                                        Note
                                                                                   $ '000     $ '000       $ '000      $ '000


Revenue                                                                            38,436      46,673    104,180     129,754

Cost of operations
Production cost                                                                    (34,425)   (29,965)    (93,690)   (72,933)
Depletion charge                                                                    (2,027)    (1,407)     (4,224)    (4,397)
Depreciation charge                                                                 (2,964)    (5,030)     (8,365)   (12,228)

Expenses
Exploration expenses                                                                (1,572)    (1,260)     (6,291)    (7,604)
Pre-development expenses                                                            (5,033)    (6,287)    (14,784)   (13,712)
Corporate and administrative cost                                                   (1,273)    (1,966)     (4,319)    (6,418)
Environmental impact study                                                            (397)      (722)     (1,279)    (1,647)
Foreign exchange gain (loss) - net                                                   5,261     (5,105)      4,838     (1,928)
Salaries and compensation
  Salaries and wages                                                                  (598)    (1,918)     (5,173)    (6,428)
  Share based payments expense                                          12(c)       (1,152)    (1,013)     (3,928)    (4,028)
  Severance cost                                                                    (6,907)         –      (6,907)         –
Professional fees                                                                   (3,617)         –      (3,617)         –
Loss from operating activities                                                     (16,268)    (8,000)    (43,559)    (1,569)
Interest expense                                                                   (30,914)    (5,980)    (45,277)   (17,177)
Interest income                                                                        375        396       1,223      1,189
Net interest expense                                                               (30,539)    (5,584)    (44,054)   (15,988)
Loss from operating activities after net interest                                  (46,807)   (13,584)    (87,613)   (17,557)
Impairment of loan due from related party                                 6         (2,395)         –      (6,395)         –
Impairment of mineral property                                            7        (24,746)         –     (24,746)         –
Loss on derivative instruments - net                                               (15,199)   (19,814)     (7,589)   (36,019)
Loss before income taxes                                                           (89,147)   (33,398)   (126,343)   (53,576)
Income tax expense                                                                    (459)      (589)     (3,023)    (1,803)
Net loss for the period                                                           (89,606)    (33,987) (129,366)     (55,379)



Basic and diluted loss per share                                                     (0.16)     (0.07)      (0.25)     (0.12)

Weighted average number of common shares outstanding (thousands)                  552,436     473,856    527,059     453,501


The accompanying notes are an integral part of these consolidated financial statements



Consolidated Statements of Comprehensive Loss
Expressed in thousands of Canadian dollars
                                                                               Three months ended       Nine months ended
                                                                                     September 30            September 30
                                                                                  2012      2011          2012      2011
                                                                                  $ '000      $ '000      $ '000      $ '000



Net loss for the period                                                         (89,606)    (33,987) (129,366)      (55,379)

Other comprehensive loss
Changes in fair value of financial instruments                           8        (1,490)          –      (1,490)          –
Cumulative translation adjustment                                                (31,595)    (56,401)    (37,941)    (86,357)
Other comprehensive loss for the period                                         (33,085)    (56,401)    (39,431)    (86,357)

Comprehensive loss for the period                                              (122,691)    (90,388) (168,797) (141,736)

The accompanying notes are an integral part of these consolidated financial statements


Consolidated Statements of Financial Position
Expressed in thousands of Canadian dollars
                                                                                         S eptember 30      December 31
                                                                           Note                  2012             2011
                                                                                                $ '000            $ '000
Assets
Current assets
Cash and cash equivalents                                                                        9,122           25,749
Trade and other receivables                                                                      6,827           14,060
Inventories                                                                  5                  22,516           19,694
Other current assets                                                                             3,069            2,404
                                                                                                41,534           61,907
Non-current assets
Inventories                                                                  5                  6,069             7,998
Loan due from related party                                                  6                      -             3,784
Property, plant and equipment                                                7                716,415           720,213
Available-for-sale financial assets                                          8                  4,956               -
Financial assets at fair value through profit or loss                        9                  2,064               -
Other assets                                                                                    6,910             5,327
Deferred income tax assets                                                                     49,383            51,081
Total assets                                                                                  827,331           850,310

Liabilities
Current liabilities
Trade and other payables                                                                       92,850            56,038
Current portion of long term debt                                            10               325,311            20,371
Current portion of other liabilities                                         11                39,901             3,050
                                                                                              458,062            79,459
Non-current liabilities
Long term debt                                                               10                   -             262,075
Other liabilities                                                            11                   -              31,197
Site reclamation obligations                                                                    5,794             6,011
Total liabilities                                                                             463,856           378,742

Equity
Share capital                                                              12(b)               883,160           833,643
Warrants                                                                   12(b)                 4,324               -
Contributed surplus                                                                             90,200            83,337
Accumulated other comprehensive loss                                                          (113,195)          (73,764)
Deficit                                                                                       (501,014)         (371,648)
Total equity                                                                                   363,475           471,568

Total liabilities and equity                                                                  827,331           850,310

The accompanying notes are an integral part of these consolidated financial statements

Approved by the Board of Directors


Lourens van Vuuren                                                                 Ronald W. Thiessen
Interim Chief Executive Officer                                                    Director



Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2012 and 2011
Expressed in thousands of Canadian dollars
                                                                                                     Accumulated
                                                                                                           other
                                                                                       Contributed comprehensive
                                                        Share capital   Warrants           surplus          loss      Deficit      Total
                                                              $'000        $'000            $'000         $'000        $'000       $'000

Balance - January 1, 2012                                    833,643           -           83,337        (73,764)    (371,648)    471,568
Comprehensive loss for the period                                -             -              -          (39,431)    (129,366)   (168,797)
Net loss for the period                                          -             -              -              -       (129,366)   (129,366)
Other comprehensive loss                                         -             -              -          (39,431)         -       (39,431)
Employee share options
  Value of services recognized (note 12(c))                      -             -            6,863           -             -        6,863
Proceeds on issuance of units in public offering (net         49,517         4,324            -             -             -       53,841
of transaction costs) (note 12(b))
Balance - September 30, 2012                                883,160          4,324         90,200      (113,195)    (501,014)    363,475

Balance - January 1, 2011                                    709,449         6,108         77,676         26,395     (353,911)    465,717
Comprehensive loss for the period                                -             -              -          (86,357)     (55,379)   (141,736)
Net loss for the period                                          -             -              -              -        (55,379)    (55,379)
Other comprehensive loss                                         -             -              -          (86,357)         -       (86,357)
Employee share options
  Value of services recognized (note 12(c))                      -             -             6,599          -             -         6,599
  Proceeds on issuing shares                                   7,288           -            (2,732)         -             -         4,556
Warrants
   Proceeds on issuing shares                                 35,393         (6,053)          -             -             -       29,340
Proceeds on issuance of shares in public offering             81,175            -             -             -             -       81,175
(net of transaction costs)
Other                                                           163            -               -             -            -          163
Balance - September 30, 2011                                833,468             55         81,543       (59,962)    (409,290)    445,814

The accompanying notes are an integral part of these consolidated financial statements


Consolidated Statements of Cash Flows
Expressed in thousands of Canadian dollars
                                                                                         Three months ended               Nine months ended
                                                                                               September 30                    September 30
                                                                                        2012          2011              2012          2011
                                                                                       $ '000          $ '000          $ '000       $ '000

Operating activities
Loss for the period                                                                  (89,606)        (33,987)       (129,366)      (55,379)
Items not involving cash
   Production non-cash charges                                                         8,777           1,111          10,625         2,078
   Depletion                                                                           2,027           1,407           4,224         4,397
   Depreciation                                                                        1,076           5,198           8,806        12,752
   Exploration non-cash charges                                                            4              30              34           121
   Pre-development non-cash charges                                                      184             290             703           665
   Unrealized foreign exchange (gain) loss                                            (5,813)          6,139          (5,620)        2,881
   Share based payments expense                                                        1,152           1,013           3,928         4,028
   Impairment of loan due from related party                                           2,395               –           6,395             –
   Impairment of mineral property                                                     24,746               –          24,746             –
   Loss on derivative instruments - net                                               15,199          19,661           7,589        35,882
   Share donation                                                                          –               –               –           163
Adjusted for
  Interest expense                                                                    30,914           5,980          45,277        17,177
  Interest income                                                                       (375)           (396)         (1,223)       (1,189)
Changes in non-cash operating working capital
  Trade and other receivables                                                            (21)            216           6,816          (362)
  Other current assets                                                                (2,186)         (1,649)           (777)       (1,068)
  Inventories                                                                          2,600          (1,522)         (8,522)       (9,232)
  Trade and other payables                                                            18,617           6,793          40,187        11,643
Net cash generated from operating activities                                           9,690          10,284          13,822        24,557

Investing activities
Advance to related party                                                                   –               –          (1,727)       (1,468)
Purchase of property, plant and equipment                                            (24,379)        (36,630)        (85,831)     (129,821)
Interest income                                                                           69             138             279           460
Reclamation deposits                                                                    (901)           (252)         (1,671)         (712)
Net cash utilized by investing activities                                            (25,211)        (36,744)        (88,950)     (131,541)

Financing activities
Common shares and warrants issued for cash, net of issue costs                            (4)         12,615          53,841       115,070
Proceeds on issuance of debt                                                           9,017               –          29,003        68,810
Repayment of debt                                                                        442         (15,968)        (14,304)      (71,723)
Interest expense                                                                      (1,163)         (1,516)        (10,510)      (10,556)
Net cash generated from (utilized by) financing activities                             8,292          (4,869)         58,030       101,601

Decrease in cash and cash equivalents                                                 (7,229)        (31,329)        (17,098)       (5,383)
Cash and cash equivalents, beginning of period                                        16,655          38,771          25,749        12,855
Foreign exchange movement on cash and cash equivalents                                  (304)           (920)            471          (950)

Cash and cash equivalents, end of period                                               9,122           6,522           9,122         6,522

Refer note 13 of the notes to the consolidated financial statements for supplementary information to the cash flow statement.


Notes to the Consolidated Financial Statements
For the three and nine months ended September 30, 2012 and 2011

1.     General information

       Great Basin Gold Ltd. is incorporated under the laws of the Province of British Columbia and its
       registered address is 1108-1030 West Georgia Street, Vancouver BC, Canada. Great Basin Gold
       Ltd., including its subsidiaries (“Great Basin” or “the Company”), is a mineral exploration and
       development company with two operating assets, both in the production build-up phase, the
       Hollister Project on the Carlin Trend in Nevada, USA and the Burnstone Project in the
       Witwatersrand Goldfields in South Africa. Over and above the exploration being conducted at the
       above mentioned properties, greenfields exploration is being undertaken in Tanzania and
       Mozambique.
       Due to delays experienced in the Burnstone production ramp-up which have caused liquidity
       challenges for the Company, a special committee of directors was formed to pursue a strategic
       review process with the objective to alleviate these strains by exploring alternatives which
       include possible asset divestitures, refinancing and/or other financial restructuring. The Company
       made a Companies Creditors Arrangement Act (“CCAA”) filing on September 19 th, 2012
       (Vancouver Registry 126583) following the business rescue (“BR”) proceedings for the
       Burnstone mine that commenced September 14, 2012 as a result of the termination of all
       development and production activities at the mine on September 11, 2012. CCAA is a Canadian
       insolvency statute which will allow the Company a period of time to seek buyers and partners for
       its two gold mining projects and/or corporate level financiers in an effort to restructure the
       Company.
       Operating results for the three and nine month periods ended September 30, 2012 are not
       necessarily indicative of the results that may be expected for the full fiscal year ending December
       31, 2012. In the opinion of management, these unaudited interim consolidated financial
       statements reflect all adjustments that are necessary for a fair presentation of the results for the
       interim periods presented.

2.     Basis of preparation

       The interim consolidated financial statements for the three and nine months ended September 30,
       2012 have been prepared in accordance with IAS34, Interim financial reporting. The condensed
       interim financial information should be read in conjunction with the annual financial statements
       for the year ended December 31, 2011, which have been prepared in accordance with
       International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
       Standards Board (“IASB”). The working capital deficit at September 30, 2012 as well as the
       insolvency filings in South Africa and Canada, indicates an uncertainty which may cast
       substantial doubt about the company's ability to continue as a going concern. See note 15 which
       details the strategic alternatives being considered by management together with managements’
       basis for continuing to adopt the going concern assumption as a basis for preparing the interim
       consolidated financial statements.

3.     Accounting policies

       These unaudited interim consolidated financial statements follow the same accounting policies
       and methods of application as the Company’s most recent annual financial statements.
       Accordingly, they should be read in conjunction with the Company’s most recent annual financial
       statements.

       The policies applied in these condensed consolidated financial statements are based on IFRS
       issued and outstanding as of November 12, 2012, the date the Board of Directors approved the
       financial statements.
       Accounting standards and amendments issued but not yet adopted

       Refer to note 2 of the Company’s most recent annual financial statements for a comprehensive
       listing of revised standards and amendments which are effective for annual periods beginning on
       or after January 1, 2013 with earlier application permitted. The Company has not yet assessed the
       impact of these standards and amendments or determined whether it will early adopt them.

4.     Estimates

       The preparation of interim financial statements requires management to make judgements,
       estimates and assumptions that affect the application of accounting policies and the reported
       amounts of assets and liabilities, income and expense. Actual results may differ from these
       estimates.
       In preparing these condensed consolidated interim financial statements, the significant
       judgements made by management in applying the Company’s accounting policies and key
       sources of estimation uncertainty were the same as those that applied to the consolidated financial
       statements for the year ended December 31, 2011. In addition, see note 15 which details the
       strategic alternatives being considered by management together with managements' basis for
       continuing to adopt the going concern assumption as a basis for preparing the interim
       consolidated financial statements.

5.     Inventories
                                                                           September 30     December 31
                                                                                  2012            2011
                                                                                   $ ‘000          $ ‘000
        Stores and materials                                                       4,797           4,699
        Unprocessed ore                                                            3,346           2,437
        Precious metals in process                                                20,442          20,556
                                                                                  28,585          27,692
        Non-current                                                               6,069            7,998
        Current                                                                  22,516           19,694
                                                                                 28,585           27,692

       Cost of operations recognized in the statement of income consists of direct and indirect mining
       costs, overhead costs, royalties, depreciation of mining equipment and depletion of mineral
       properties. The Company recognized cost of inventories of $39 million (2011: $36 million) and
       $106 million (2011: $90 million) as cost of operations expenses during the three and nine months
       ended September 30, 2012 respectively.
       Inventories including unprocessed ore and precious metals in process of $2.7 million are carried
       at net realizable value (2011: $nil). Non-current inventories comprise of gold in lock-up in
       metallurgical plants which are expected to be realized upon plant clean-up or dismantling.


6.     Related party balances and transactions

       Related party transactions are recorded at the exchange amount which is the amount of
       consideration paid or received.
       Loan due from related party
                                                                         September 30      December 31
                                                                                2012             2011
                                                                                  $’000           $’000
        Balance, beginning of the period                                          3,784          13,372
         Cash advances                                                            1,727           4,506
         Interest earned                                                            944           1,000
         Impairment provision                                                   (6,395)        (13,680)
         Foreign exchange                                                           (60)        (1,414)
        Balance, end of the period                                                     -          3,784

       In 2007 the Company completed a series of transactions in order to achieve compliance with
       South Africa’s post-apartheid legislation designed to facilitate participation by historical
       disadvantages South Africans (“HDSAs”) in the mining industry. This legislation is reflected in
       the South African Mining Charter and required the Company to achieve a target of 26%
       ownership by HDSA in the Company’s South African projects by 2014. In order to comply with
       these requirements, Tranter Burnstone (Pty) Ltd (“Tranter”), an HDSA company, acquired
       19,938,650 Great Basin treasury common shares for $38 million (ZAR260 million) which,
       because it involved indirect economic participation in both the Hollister and Burnstone projects,
       was deemed equivalent to a 26% interest in Burnstone. Tranter borrowed ZAR200 million ($27
       million) from Investec Bank Ltd (“Investec”), a South African bank, to partly fund the purchase
       of the shares and the Company gave a loan guarantee in favour of Tranter limited of ZAR140
       ($16.6 million) million. A loan of $16.2 million (ZAR 136.4 million) was advanced to Tranter
       under the guarantee agreement to enable Tranter to meet its payment obligation to Investec.
       As a result of this loan the remaining guarantee available, as at September 30, 2012, is $0.4
       million (ZAR3.6 million) (2011: $2.2 million (ZAR17 million)) (refer note 11).
       Any advances to Tranter are due to be repaid in installments from 2014 to 2017, with interest
       accruing at the South African prime interest rate plus 2%. Security for any advances made
       includes a second charge against any shares of the Company held by Tranter (second to Investec).
       The fair value of the security, based on the prolonged decline in the Company’s share price, was
       deemed inadequate and the Company raised a fair value impairment provision of $2.4 million
       (ZAR19.7 million) and $6.4 million (ZAR51.3 million) during the three and nine months ended
       September 30, 2012 respectively. These are in addition to the $13.7 million (ZAR100 million)
       impairment provision raised against the loan to provide for its exposure to potential future
       repayment losses in quarter 4 of 2011.



7.     Property, plant and equipment
                                                                                   Assets
                                      Mineral             Mine         Mine         under       Other
                                   properties   infrastructure   equipment    construction     assets      Total
                                       $’000             $’000        $’000         $’000       $’000      $’000
        Period ended September 30, 2012
        At January 1, 2012          164,854          460,320        40,131        47,141        7,767    720,213
        Additions                          -          48,427           298        42,852          155      91,732
        Disposal                           -               -         (824)              -           -       (824)
        Transfers                    (9,565)           3,220         2,630        (5,948)          98     (9,565)
        Impairment                  (24,746)               -             -              -           -    (24,746)
        Depletion and
        depreciation                 (4,751)          (5,197)       (8,965)              -     (1,076)   (19,989)
        Foreign exchange
        differences                  (5,607)         (28,353)       (1,854)       (4,211)        (381)   (40,406)
        At September 30, 2012       120,185          478,417        31,416         79,834       6,563    716,415
        At September 30, 2012
        Cost                        144,705          493,514         62,606        79,834      11,618     792,277
        Accumulated depreciation    (24,520)         (15,097)      (31,190)             -      (5,055)    (75,862)
        Net book value              120,185          478,417        31,416         79,834       6,563     716,415
        Year ended December 31, 2011
        At January 1, 2011       182,992              23,064        44,399        435,255       9,664     695,374
        Additions                      85                389        11,443        138,151         898     150,966
        Transfers                       -            482,985             -      (482,985)           -           -
        Depletion and
        depreciation              (5,354)             (9,103)       (9,634)              -     (1,508)    (25,599)
        Foreign exchange
        differences              (12,869)            (37,015)       (6,077)      (43,280)      (1,287)   (100,528)
        At December 31, 2011        164,854          460,320        40,131         47,141       7,767     720,213
        At December 31, 2011
        Cost                        185,404          470,913         64,460        47,141      11,959     779,877
        Accumulated depreciation    (20,550)         (10,593)      (24,329)             -      (4,192)    (59,664)
        Net book value              164,854          460,320        40,131         47,141       7,767     720,213

       Depletion of $2.4 million relating to stockpiled tons and ounces in process was capitalized to the
       value of the unprocessed ore and precious metals in process at September 30, 2012 (2011: $1.7
       million) (refer note 5).
       Mineral properties of $109 million consisting of the Hollister, Esmeralda and Burnstone
       properties and fixed assets of $596 million have been pledged as security for the term loans (refer
       note 10(a) and 10(b)).
       Mining equipment includes leased assets with net book values as set out below. These assets are
       pledged as security for the related finance leases (refer note 10).
                                                                                     September 30        December 31
                                                                                             2012               2011
                                                                                             $’000             $’000
        Cost                                                                                 138               5,451
        Accumulated depreciation                                                             (16)              (981)
        Net book value                                                                       122              4,470


       The Company entered into an agreement in June 2011 whereby it granted Shanta Gold Limited
       (“Shanta”) the option, following the fulfillment of the conditions precedent, to acquire an 80%
       interest in the Company’s wholly-owned subsidiary, Shield Resources Limited (“Shield”), who is
       the holder of various prospecting licenses in the Lupa region of Tanzania.
       In consideration for providing Shanta with the exclusive right to acquire the shares in Shield,
       Shanta issued 12,368,584 ordinary shares and 12,368,584 Shanta warrants to the Company.
       Furthermore Shanta has to fund a US$12 million exploration program, spread over a period of 3
       years ending December 31, 2014 and make additional payments depending on the number of gold
       ounce resources discovered. Shanta will acquire the 80% equity interest in Shield upon the
       completion of the exploration program.
       Conditions precedent to affect the transaction were satisfied by August 22, 2012. The Company
       recorded its investment in Shanta shares and warrants, at fair values of $6.4 million and $3.2
       million respectively, against mineral properties on the effective date (refer note 8 and 9).
       Mineral properties relating to the Company’s Tanzanian assets were impaired following the
       CCAA filing on September 19, 2012. The Company previously valued these properties based on
       the assumption that further exploration will be conducted by the Company which will allow for a
       value increase in these assets. Given the liquidity challenges the Company is facing, it is unable
       to continue with this valuation method. A valuation based on the estimated disposal value of the
       mineral properties resulted in the $24.7 million impairment loss being recognized.

8.     Available-for-sale financial assets
                                                                            September 30    December 31
                                                                                   2012           2011
                                                                                    $’000           $’000
        Balance, beginning of the period                                                -               -
         Fair value upon addition                                                   6,384               -
         Unrealized fair value loss                                               (1,490)               -
         Foreign exchange                                                              62
        Balance, end of the period                                                  4,956               -

       Shanta, a mineral resources and exploration company with operations in Africa, is a publicly
       traded company on the AIM market of the London Stock Exchange. The Company received
       12,368,584 shares as partial consideration for providing Shanta with the exclusive right to acquire
       the shares in Shield (refer note 7). The shares were recorded at its fair value of $6.4 million on
       August 22, 2012, which was calculated based on the closing price of GBP 32.90 pence per share
       and an exchange rate of $1.57:1GBP.
       An unrealized fair value loss of $1.5 million for the period ended September 30, 2012 is reported
       in the Consolidated Statements of Comprehensive Loss under other comprehensive loss and was
       calculated based on the closing price of GBP 25.25 pence per share and an exchange rate of
       $1.59:1GBP.

9.     Financial assets at fair value through profit or loss
                                                                          September 30    December 31
                                                                                 2012           2011
                                                                                  $’000          $’000
        Balance, beginning of the period                                             -               -
         Addition – Shanta warrants received                                     3,182               -
         Unrealized fair value loss                                            (1,155)               -
         Foreign exchange                                                           37               -
        Balance, end of period                                                   2,064               -

       The Company received a further 12,368,584 warrants as remaining consideration for providing
       Shanta with the exclusive right to acquire the shares in Shield (refer note 7). The warrants are
       exercisable at GBP 35 pence per share, expire on August 22, 2015 and are carried at fair value.

10.    Long term debt
       Non-current portion of long term debt
                                                                         September 30     December 31
                                                                                2012            2011
                                                                                 $ ‘000         $ ‘000
        Convertible debentures                                                        -        97,669
        Finance lease liabilities                                                     -            71
        Term loan I (note 10(a))                                                      -       125,879
        Term loan II (note 10(b))                                                     -        38,456
                                                                                      -       262,075

       Current portion of long term debt
                                                                         September 30     December 31
                                                                                2012            2011
                                                                                 $ ‘000         $ ‘000
        Convertible debentures                                                129,873             843
        Finance lease liabilities                                                  78           2,902
        Term loan I (note 10(a))                                              152,794             280
        Term loan II (note 10(b))                                              42,566          16,346
                                                                              325,311          20,371
       The continuity of long term debt is as follows:
                                                                          September 30     December 31
                                                                                 2012            2011
                                                                                  $ ‘000         $ ‘000
        Balance, beginning of the period                                       282,446         209,578
         New debt                                                                29,003        135,321
         New leases                                                                   -           1,989
         Lease written off                                                        (474)               -
         Transaction cost                                                         (260)         (6,525)
         Repayment of debt and interest                                        (23,499)        (94,010)
         Settlement loss on senior secured notes                                      -           8,817
         Amortized transaction cost                                               1,323           1,231
         Interest expense                                                        42,899          25,476
         Foreign exchange                                                       (6,127)             569
        Balance, end of the period                                             325,311         282,446

       (a) Term loan I
       In December 2011, the Company restructured Term loan I, thereby increasing the facility to
       $152.6 million (US$150 million) and extending repayment to 2016. $132 million (US$130
       million) of the restructured facility was drawn down on December 15, 2011, with the remaining
       $20 million (US$20 million) drawn down during the six months ended June 30, 2012.
       The Company received emergency funding of $9 million (US$9.2 million) on September 21,
       2012, under Term loan I, which was repaid upon first drawdown of the Debtor-in-Possession
       facility agreement (“DIP facility agreement”) in October 2012 and at an interest rate of 4.181% (1
       week USD LIBOR of 0.181% plus 4% premium) (refer note 16(a)).
       The Burnstone Property, its assets and certain subsidiary guarantees serve as security for the
       facility (refer note 7).
       Term loan I currently has a maximum term of 5 years from the December 15, 2011 draw down
       with repayment of capital structured in 16 quarterly consecutive installments set to commence on
       March 15, 2013. The interest rate for Term loan I is linked to the US$ London interbank offered
       rate (“US$ LIBOR”) at a premium of 4% above US$ LIBOR and is fixed on a quarterly basis.
       The floating rate on September 30, 2012 is 4.38875% (USD LIBOR of 0.38875% plus 4%
       premium).
       Operating and development activities were suspended at the Burnstone mine in early September
       2012 which created a default under the loan agreement. Term loan 1 will be restructured or
       settled under the Business rescue proceedings of the South African subsidiary owing title to the
       Burnstone mine as well as the CCAA filing by the Company. As a result of the default the
       outstanding amounts have been disclosed as current.
       Refer to note 11(a) and note 16(b) for details of the hedge structure entered into under the Term
       loan I agreement.


       (b) Term loan II
       Term loan II is being repaid in 14 remaining quarterly consecutive installments. The interest rate
       for Term loan II is linked to the US$ LIBOR at a premium of 3.75% above US$ LIBOR and is
       fixed on a quarterly basis. The floating rate on September 30, 2012 is 4.13875% (USD LIBOR of
       0.38875% plus 3.75% premium).
       The Hollister project and a surety signed by the Company serve as security for the loan (refer
       note 7).
       Covenants on Term loan II were breached as a result of the Company failing to finance the Debt
       Service Reserve Account in September 2012. This loan will be restructured or refinanced as part
       of the Strategic review process the Company initiated under the CCAA filing. As a result of the
       default the outstanding amounts have been disclosed as current.
       Refer to note 11(b) for details of the hedge structure entered into under the Term loan II
       agreement.
       (c) Convertible debentures
       An aggregate of $126.5 million principal amount of 8% senior unsecured convertible debentures
       at a price of $1,000 per Debenture were issued on November 12, 2009. The Debentures mature on
       November 30, 2014 (“the Maturity date”) and bear interest at the rate of 8% per annum. Interest
       is payable semi-annually in arrears on May 30 and November 30 of each year.
       The fair value of the liability and equity components were calculated on issuance of the
       debentures. The fair value of the liability component, included in long term borrowings, was
       calculated using an estimated market related interest rate of 16.5%. The residual amount,
       representing the value of the equity component, is included in shareholders’ equity in contributed
       surplus.
       Operating and development activities were suspended at the Burnstone mine in early September
       2012 which created a default under the debenture agreement. The liability component, previously
       presented on the amortized cost basis, had to be increased to its fair value and the Company
       accordingly recorded interest of $22.9 million during Q3 2013. As a result of the default the
       outstanding amounts have been disclosed as current.

11.    Other liabilities
       Non-current portion of other liabilities
                                                                          September 30     December 31
                                                                                 2012            2011
                                                                                  $ ‘000          $ ‘000
        Zero cost collar program I (note 11(a))                                        -         17,834
        Zero cost collar program II (note 11(b))                                       -         13,363
                                                                                       -         31,197

       Current portion of other liabilities
                                                                               September 30       December 31
                                                                                      2012              2011
                                                                                       $ ‘000            $ ‘000
        Financial guarantee                                                              432             2,165
        Zero cost collar program I (note 11(a))                                       24,463               666
        Zero cost collar program II (note 11(b))                                      15,006               219
                                                                                      39,901             3,050

       The continuity of other liabilities is as follows:
                                                                                September 30       December 31
                                                                                       2012              2011
                                                                                        $ ‘000            $ ‘000
        Balance, beginning of the period                                              34,247              12,697
        ZCC fair value upon inception                                                       -             43,212
        ZCC fair value upon novation                                                        -           (18,295)
        ZCC marked-to-market adjustments                                                8,315            (3,814)
        Financial guarantee fair value adjustment                                     (1,690)                  -
        Foreign exchange                                                                (971)                447
        Balance, end of the period                                                    39,901             34,247

       (a) Zero cost collar program I
       In connection with Term loan I (refer note 10(a)), the Company executed a zero cost collar hedge
       program for a total 165,474 gold ounces over a period of five years that commenced in January
       2012.
       The pricing and delivery dates of the put and call options are presented in note 11(d) below.
       The marked-to-market movements until September 30, 2012 were calculated using an option
       pricing model with inputs based on the following assumptions:
                                                                           September 30             December 31
                                                                                   2012                     2011
        Gold price (per ounce)                                                 US$1,772                US$1,564
        Risk free interest rate                                           0.23% - 0.57%          0.33% - 1.285%
        Expected life                                                      1 - 51 months           1 – 60 months
        Gold price volatility                                           15.06% - 25.16%            20.35% - 32%
       Gold delivery positions as at September 30, 2012:
                                                                             September 30          December 31
                                                                                    2012                 2011
        Expired unexercised at no cost                                       13,782 ounces            Nil ounces
        Delivered                                                                Nil ounces           Nil ounces
        Remaining positions                                                 151,692 ounces       165,474 ounces

       Refer to note 16(b) for details of early termination of the hedge.


       (b) Zero cost collar program II
       In connection with Term loan II (refer note 10(b)), the Company executed a zero cost collar
       hedge program for a total 117,500 gold ounces over a period of four years that commenced in
       January 2012.
       The pricing and delivery dates of the put and call options are presented in note 11(d) below.
       The marked-to-market movements until September 30, 2012 were calculated using an option
       pricing model with inputs based on the following assumptions:
                                                                                   September 30          December 31
                                                                                            2012                 2011
        Gold price (per ounce)                                                          US$1,772             US$1,564
        Risk free interest rate                                                    0.23% - 0.45%        0.33% - 1.06%
        Expected life                                                               1 - 39 months        1 - 48 months
        Gold price volatility                                                       15.06% - 24%      20.35% - 30.76%
       Gold delivery positions as at September 30, 2012:
                                                                                   September 30             December 31
                                                                                          2012                    2011
        Expired unexercised at no cost                                             7,875 ounces              Nil ounces
        Delivered                                                                     Nil ounces             Nil ounces
        Remaining positions                                                      109,625 ounces         117,500 ounces

       (c) Classification
       The fair values of the derivative instruments as of September 30, 2012 are as follows:
                                                                                     Asset        Liability           Net
                                                                                derivatives    derivatives    derivatives
                                                                                 Estimated     Estimated      Estimated
        Derivatives not designated as hedging      Statement of financial         fair value    fair value     fair value
        instruments                                position classification            $’000          $’000          $’000
        Commodity contracts (gold) – ZCC 1          Current other liabilities        5,414       (29,877)       (24,463)
        Commodity contracts (gold) – ZCC 2          Current other liabilities          973       (15,979)       (15,006)
                                                                                     6,387       (45,856)       (39,469)

       (d) Gold delivery positions
       The Company’s gold delivery positions as at September 30, 2012 are as follows:
       Put options
                                                 2012          2013      2014          2015         2016          Total
                              Strike price       AU oz         AU oz     AU oz         AU oz        AU oz         AU oz
        ZCC – 1                    $900          7,530             -        -             -            -         7,530
        ZCC – 1                    $950              -        28,506        -             -            -        28,506
        ZCC – 1                   $1,200             -             -   34,008        39,768       41,880       115,656
        ZCC – 2                   $1,050         2,625        36,000   36,000        35,000            -       109,625
                                                10,155        64,506   70,008        74,768       41,880       261,317

       Call options
                               Strike       2012          2013     2014     2015     2016      Total
                               price        AU oz         AU oz    AU oz    AU oz    AU oz     AU oz
        ZCC – 1                $1,890      3,765         14,253   17,004   19,884   20,940    75,846
        ZCC – 1                $1,930      3,765         14,253   17,004   19,884   20,940    75,846
        ZCC – 2                $1,930      2,625         36,000   36,000   35,000        -   109,625
                                          10,155         64,506   70,008   74,768   41,880   261,317

       As a result of the default on the Term loans, the net hedge liabilities have been disclosed as
       current.

12.    Share capital

       (a) Authorized share capital
       The Company’s authorized share capital consists of an unlimited number of common shares
       without par value.

       (b) Public offering, March and April 2012
       The Company completed a public offering on March 30, 2012 whereby it issued 66,700,000 units
       (the “Units”) at a price of $0.75 per Unit. On April 5, 2012, the Company issued a further 10
       million Units for proceeds of $7.5 million upon closing the offering’s overallotment.

       Each Unit consisted of one common share (each, a “Common Share”) in the capital of the
       Company and one-half of one common share purchase warrant (each whole common share
       purchase warrant, a “Warrant”) of the Company.
       Each Warrant entitles the holder thereof to purchase one Common Share at a price of $0.90 until
       expiry on March 30, 2014.
       On the date of issuance, the fair value of the 38,352,500 warrants was estimated at $0.12 per
       warrant. The valuation was performed by using an option pricing model.
       The Company paid the underwriters a fee of $2.9 million and incurred other share issue costs of
       approximately $0.79 million. Net proceeds of $49.5 million and $4.3 million have been recorded
       as share capital and warrants respectively.

       (c) Share option plan
       The continuity of share purchase options is as follows:
                                                                                      Contractual weighted
                                        Weighted average         Number of options   average remaining life
                                         exercise price              (thousands)                   (years)
        Opening total at January 1            $1.97                         17,958                    2.22
        Granted to employees                  $0.95                         12,490
        Cancelled                             $1.71                       (20,270)
        Replaced                              $0.75                         10,135
        Expired                               $1.82                        (1,227)
        Forfeited                             $1.16                        (7,312)
                                              $0.81                        11,774                     3.82

       Directors, employees and certain consultants were allowed to cancel unexercised employee and
       non-employee stock options and receive new options equal to 50% of the cancelled options at an
       exercise price of $0.75 and vesting period of 24 months. The cancellation of these options was
       concluded on June 7, 2012.
       The cancelled options were accounted for as cancellations in accordance with IFRS 2 where any
       carry forward cost not yet recognized was recognized immediately in the statement of operations.
       The new options issued were accounted for as modifications in accordance with IFRS 2, where
       the incremental value was recorded as additional cost measured by the difference between the fair
       value of the cancelled options calculated on the modification date and the value of the
       replacement options at the modification date. The amount is recognized over the vesting period
       of the replacement option. Any remaining compensation cost for as yet unvested cancelled
       options is also recognized over the new vesting period. In addition, approximately 5 million
       options were forfeited during the quarter ended September 30, 2012 as a result of the
       retrenchment of employees.
       As at September 30, 2012, 2.7 million of the outstanding options were exercisable at an average
       exercise price of $1.01 per option and expiry dates ranging between March 26, 2013 and May 16,
       2015.
       On June 1, 2012, 677,766 out of plan options expired unexercised. These options were issued
       with the acquisition of mineral properties in 2008.
       Costs previously recognized on options were, upon forfeiture, reversed through the current
       period’s consolidated statement of loss.
       The exercise prices of all share purchase options granted during the three and nine months ended
       September 30, 2012 and 2011 were at or above the market price at the grant date.

       (c) Share option plan (continued)
       Using an option pricing model with the assumptions noted below, the estimated fair value of
       options granted to employees which have been included in the consolidated statement of loss for
       the three and nine months ended September 30, 2012, is as follows:
                                                                                         Three months ended September 30
                                                                                                     2012          2011
                                                                                                     $ ‘000          $ ‘000
        Total compensation cost recognized, credited to contributed surplus                          1,547           1,634
        Compensation cost allocated to production cost                                               (395)           (621)
        Share based payments expense                                                                 1,152           1,013
                                                                                           Nine months ended September 30
                                                                                                      2012          2011
                                                                                                     $ ‘000          $ ‘000
        Total compensation cost recognized, credited to contributed surplus                           6,863          6,599
        Compensation cost allocated to production cost                                              (2,935)        (2,475)
        Compensation cost capitalized on Burnstone mine development                                       -            (96)
        Share based payments expense                                                                 3,928           4,028

       The weighted-average assumptions used to estimate the fair value of options granted during the
       respective periods were as follows:
                                                                             Three months ended         Nine months ended
                                                                                   September 30              September 30
                                                                                   1
                                                                              2012         2011         2012         2011
        Risk free interest rate                                                      -     1.9%         1.79%         2.5%
        Expected life                                                                -   3 years     3.6 years    3.4 years
        Expected volatility                                                          -      80%        64.21%          81%
        Expected dividends                                                           -        Nil           Nil          Nil
        1 No options were granted during the three months ended September 30, 2012



13.    Additional cash flow information
        Supplementary information
                                                                                         Three months ended September 30
                                                                                                    2012           2011
                                                                                                    $’000            $’000

        Income taxes paid                                                                               -                1

        Non-cash investing activities:
        Depreciation capitalized to property, plant and machinery (note 7)                          1,660           1,101
        Fair value of stock options transferred to share capital from contributed                       -           1,158
        surplus on options exercised
        Fair value of warrants transferred to share capital on warrants exercised                       -           2,260
        Fair value of available-for-sale financial assets transferred from mineral                  6,384               -
        properties (note 8)
        Fair value of financial assets at fair value through profit or loss                         3,182                -
        transferred from mineral properties (note 9)
                                                                                    Three months ended September 30
                                                                                                2012           2011
                                                                                               $’000           $’000

         Income taxes paid                                                                         -              3

         Non-cash investing activities:
         Depreciation capitalized to property, plant and machinery (note 7)                    5,123           3,419
         Accrued interest capitalized to property, plant and machinery (note 7)                    -           2,515
         Share based compensation capitalized (refer note 12(c))                                   -              96
         Fair value of available-for-sale financial assets transferred from mineral            6,384               -
         properties (note 8)
         Fair value of financial assets at fair value through profit or loss                   3,182               -
         transferred from mineral properties (note 9)

         Non-cash financing activities:
         Fair value of stock options transferred to share capital from contributed                 -           2,732
         surplus on options exercised
         Fair value of warrants transferred to share capital on warrants exercised                 -           6,063

14.    Segment disclosure

The Company operates in reportable operating segments to deliver on its strategy to explore, develop and
exploit mineral properties. Management has determined the operating segments based on the reports
reviewed by the Company's Chief Operating Decision Maker ("CODM") that are used to make strategic
decisions. The Company's CODM at the date of filing these interim consolidated financial statements is
its interim Chief Executive Officer.


       Segment statement of income – three months ended September 2012
                                                   North          South
                                                American         African   Tanzanian
                                                                                                 1
                                               operations     operations   operations    Other          Total
                                                    $’000          $’000        $’000      $’000        $’000

        Revenue                                   31,097          7,339             -            -    38,436
        Cost of operations
        Production cost                          (24,565)        (9,860)            -            -   (34,425)
        Depletion charge                          (1,982)           (45)            -            -    (2,027)
        Depreciation charge                       (1,516)        (1,448)            -            -    (2,964)
        Expenses
        Exploration expenses                      (1,282)           (71)        (219)          -      (1,572)
        Pre-development expenses                  (5,033)              -            -          -      (5,033)
        Corporate and administrative cost               -           (11)          (1)    (1,261)      (1,273)
        Environmental impact study                  (397)              -            -          -        (397)
        Foreign exchange gain (loss)                    -             57           32      5,172        5,261
        Salaries and compensation
         Salaries and wages                               -            -            -      (598)        (598)
         Share based compensation                         -            -            -    (1,152)      (1,152)
         Severance cost                                   -      (6,180)            -      (727)      (6,907)
        Professional fees                                 -            -            -    (3,617)      (3,617)
        Loss from operating activities            (3,678)       (10,219)        (188)    (2,183)     (16,268)
        Interest expense                          (1,446)        (2,001)            -   (27,467)     (30,914)
        Interest income                                 -            356            -         19          375
        Net interest expense                      (1,446)        (1,645)            -   (27,448)     (30,539)
        Loss from operating activities
        after net interest                        (5,124)       (11,864)        (188)   (29,631)     (46,807)
        Impairment of loan due from related
        party                                           -              -            -    (2,395)      (2,395)
        Impairment of mineral property                  -              -     (24,746)          -     (24,746)
        Loss on derivative instruments – net      (5,224)        (8,820)      (1,155)          -     (15,199)
        Loss before income taxes                 (10,348)       (20,684)     (26,089)   (32,026)     (89,147)
        Income tax expense                          (459)              -            -          -        (459)
        Net loss for the period                  (10,807)       (20,684)     (26,089)   (32,026)     (89,606)
       1 Corporate entities


       Segment statement of income – three months ended September 2011
                                                      North          South
                                                   American         African   Tanzanian
                                                                                                    1
                                                  operations     operations   operations    Other          Total
                                                       $’000          $’000        $’000      $’000        $’000

        Revenue                                      35,753         10,920             -            -    46,673
        Cost of operations
        Production cost                             (14,481)       (15,484)            -            -   (29,965)
        Depletion charge                             (1,174)          (233)            -            -    (1,407)
        Depreciation charge                            (894)        (4,136)            -            -    (5,030)
        Expenses
        Exploration expenses                           (852)           (94)        (314)          -      (1,260)
        Pre-development expenses                     (6,287)              -            -          -      (6,287)
        Corporate and administrative cost                  -              -         (18)    (1,948)      (1,966)
        Environmental impact study                     (722)              -            -          -        (722)
        Foreign exchange (loss) gain                       -              -            5    (5,110)      (5,105)
        Salaries and compensation
         Salaries and wages                                  -            -            -    (1,918)      (1,918)
         Share based compensation                            -            -            -    (1,013)      (1,013)
        Profit (loss) from operating activities      11,343         (9,027)        (327)    (9,989)      (8,000)
        Interest expense                              (598)         (1,079)            -    (4,303)      (5,980)
        Interest income                                   -             316            -         80          396
        Net interest expense                          (598)           (763)            -    (4,223)      (5,584)
        Profit (loss) from operating
        activities after net interest                 10,745        (9,790)        (327)   (14,212)     (13,584)
        Loss on derivative instruments – net        (10,357)        (9,457)            -          -     (19,814)
        Profit (loss) before income taxes                388       (19,247)        (327)   (14,212)     (33,398)
        Income tax expense                             (589)              -            -          -        (589)
        Net loss for the period                        (201)       (19,247)        (327)   (14,212)     (33,987)
       1 Corporate entities


       Segment statement of income – nine months ended September 2012
                                                   North          South
                                                American         African   Tanzanian
                                                                                                 1
                                               operations     operations   operations    Other           Total
                                                    $’000          $’000        $’000      $’000         $’000

        Revenue                                   77,261         26,919             -            -    104,180
        Cost of operations
        Production cost                          (54,149)       (39,541)            -            -    (93,690)
        Depletion charge                          (4,072)          (152)            -            -     (4,224)
        Depreciation charge                       (3,479)        (4,886)            -            -     (8,365)
        Expenses
        Exploration expenses                      (5,173)         (260)         (858)          -       (6,291)
        Pre-development expenses                 (14,784)             -             -          -      (14,784)
        Corporate and administrative cost               -          (57)          (59)    (4,203)       (4,319)
        Environmental impact study                (1,279)             -             -          -       (1,279)
        Foreign exchange gain (loss)                    -           149            27      4,662         4,838
        Salaries and compensation
         Salaries and wages                               -            -            -    (5,173)       (5,173)
         Share based compensation                         -            -            -    (3,928)       (3,928)
         Severance cost                                   -      (6,180)            -      (727)       (6,907)
        Professional fees                                 -            -            -    (3,617)       (3,617)
        Loss from operating activities            (5,675)       (24,008)        (890)   (12,986)      (43,559)
        Interest expense                          (3,212)        (5,642)            -   (36,423)      (45,277)
        Interest income                                 -          1,163            -         60         1,223
        Net interest expense                      (3,212)        (4,479)            -   (36,363)      (44,054)
        Loss from operating activities
        after net interest                        (8,887)       (28,487)        (890)   (49,349)      (87,613)
        Impairment of loan due from related
        party                                           -              -            -    (6,395)       (6,395)
        Impairment of mineral properties                -              -     (24,746)          -      (24,746)
        Loss on derivative instruments – net      (1,911)        (4,523)      (1,155)          -       (7,589)
        Loss before income taxes                 (10,798)       (33,010)     (26,791)   (55,744)     (126,343)
        Income tax expense                        (3,023)              -            -          -       (3,023)
        Net loss for the period                  (13,821)       (33,010)     (26,791)   (55,744)     (129,366)
       1 Corporate entities




        Segment statement of income – nine months ending September 2011
                                                         North           South
                                                      American          African       Tanzanian
                                                                                                               1
                                                     operations      operations       operations       Other          Total
                                                          $’000           $’000            $’000         $’000        $’000

        Revenue                                        106,948          22,806                    -            -   129,754
        Cost of operations
        Production cost                                (46,559)        (26,374)                   -            -   (72,933)
        Depletion charge                                (3,894)           (503)                   -            -    (4,397)
        Depreciation charge                             (2,880)         (9,348)                   -            -   (12,228)
        Expenses
        Exploration expenses                            (6,350)           (301)           (9530              -      (7,604)
        Pre-development expenses                       (13,712)               -                -             -     (13,712)
        Corporate and administrative cost                     -               -            (324)       (6,094)      (6,418)
        Environmental impact study                      (1,647)               -                -             -      (1,647)
        Foreign exchange (loss) gain                          -               -              (7)       (1,921)      (1,928)
        Salaries and compensation
         Salaries and wages                                     -                -                -    (6,428)      (6,428)
         Share based compensation                               -                -                -    (4,028)      (4,028)
        Profit (loss) from operating activities         31,906         (13,720)          (1,284)      (18,471)      (1,569)
        Interest expense                                (1,410)         (3,594)                -      (12,173)     (17,177)
        Interest income                                       -           1,024                -           165        1,189
        Net interest expense                            (1,410)         (2,570)                -      (12,008)     (15,988)
        Profit (loss) from operating
        activities after net interest                   30,496         (16,290)          (1,284)      (30,479)     (17,557)
        (Loss) profit on derivative
        instruments – net                              (20,034)         (7,168)                -       (8,817)     (36,019)
        Profit (loss) before income taxes                10,462        (23,458)          (1,284)      (39,296)     (53,576)
        Income tax expense                              (1,803)               -                -             -      (1,803)
        Net profit (loss) for the period                 8,659         (23,458)          (1,284)      (39,296)     (55,379)

       Refined precious metals were sold to RK Mine Finance Trust I (“RK Mine”) under the terms of
       an off-take agreement.
       Statement of financial position
                                                      North             South
                                                   American            African       Tanzanian
                                                                                                               1
                                                  operations        operations       operations        Other          Total
        September 30, 2012                             $’000             $’000            $’000          $’000        $’000

        Total assets                                168,636           631,646           17,977          9,072      827,331
        Total liabilities                           104,199           223,606              107        135,944      463,856
       1 Corporate entities



                                                             North               South
                                                          American              African          Tanzanian
                                                                                                                       1
                                                         operations          operations          operations    Other         Total
        December 31, 2011                                       $’000               $’000             $’000     $’000        $’000

        Total assets                                        180,682             613,772             45,392     10,464      850,310
        Total liabilities                                   100,198             174,941                 19    103,584      378,742
       1 Corporate entities



       Additions to non-current assets2
                                                             North               South
                                                          American              African          Tanzanian
                                                                                                                       1
                                                         operations          operations          operations    Other         Total
                                                                $’000               $’000             $’000     $’000        $’000

        September 30, 2012                                     4,902              86,771                  -       59        91,732
        December 31, 2011                                      7,353            143,641               (117)       89       150,966

       1 Corporate entities
       2 Additions to non-current assets exclude financial instruments and deferred tax assets



15.    Liquidity

       The operational performance from the Nevada and South African operations resulted in a
       working capital deficit of approximately $23 million on June 30, 2012. The Board of Directors
       initiated a review process in August 2012 to consider a range of strategic alternatives with a view
       to preserving and enhancing shareholder value in light of the continuing financial challenges.
       Strategic alternatives are likely to include, but are not limited to, the sale of all or a portion of the
       Company's assets, a merger or other business combination transaction involving a third party
       acquiring all of the Company, a capital raising, recapitalization, reorganization, or restructuring of
       the Company, as well as continued execution of the Company's existing business plan, or some
       combination of these alternatives.

       The Company has secured from its existing bank lenders a $35 million working capital loan
       which was approved as a DIP loan by order of the British Columbia Supreme Court pursuant to
       the CCAA filing made on September 19th, 2012. The DIP Loan is a post-commencement
       financing under the business rescue provisions of the South African Companies Act which
       commenced September 14, 2012. CCAA is a Canadian insolvency statute which will allow the
       Company a period of time to complete its Strategic Review process. The DIP Loan proceeds is
       being used, subject to the concurrence of a business rescue practitioner in South Africa and
       KPMG LLP, the CCAA-appointed monitor in Canada, to affect an orderly suspension of
       operations at Burnstone, ongoing care and maintenance of Burnstone assets, and for working
       capital at Hollister.
       In assessing whether the Company was a going concern management was cognizant of the CCAA
       and Business rescue proceedings initiated during the quarter.

       These proceedings allow the Company the time it requires to complete its Strategic review
       process which will provide the required information to assess the going concern status of the
       Company. Available in-house valuations of the Company’s assets currently indicate excess value
       to the liabilities of the Company. As part of the Strategic review process potential investors or
       bidders for the Company assets is being sought which will provide accurate evidence of arms
       length market valuation of the assets. The Company is also updating the Mineral resource and
       reserves for the Burnstone property which will provide the basis for an updated valuation based
       on a discounted cash flow model. The outcome of the market value indication as well as the
       updated discounted cash flow valuation will provide management with evidence to re-evaluate
       the going concern status of the Company at December 31, 2012.

16.    Subsequent events

       Subsequent to September 30, 2012

       (a) Debtor-in-possession Loan Agreement
       The Company executed the DIP loan agreement on October 3, 2012. $14 million (US$14.3
       million) of the $34.4 million (US$35 million) DIP facility was drawn down on October 3, 2012.
       $9.1 million (US$9.3 million) of the proceeds repaid the emergency funding, plus accrued
       interest, advanced on September 21, 2012 under Term loan I (refer note 10(a)). A further $5.4
       million (US$5.5 million) was drawn down on October 23, 2012. An additional $24 million
       (US$24.5 million) remains available for future draw down on November 12, 2012.
       The $34.4 million (US$35 million) DIP facility has a term of 6 months with the option to extend
       for 3 months. The interest rate for the DIP facility is linked to the US$ LIBOR at a premium of
       10% above US$ LIBOR and is fixed on a weekly basis.
       The Burnstone and Hollister Properties, its assets and certain subsidiary guarantees serve as
       security for the facility (refer note 7).

       (b) Early termination of zero cost collar hedge program I

       On October 3 and 5, 2012, the Company received notice of early termination of all transactions
       outstanding under ZCC I. This hedge structure was terminated at a realized loss of approximately
       $25.4 million (U$25.9 million) as a result of the default under the Term loan I agreement. The
       realized liability has been added to the outstanding principal value of Term loan I. The fair value
       of the liability was valued at $24.5 million (U$24.9 million) at September 30, 2012 (refer note
       11(a)).

       (c) Related party transaction
       Following negotiations between the Company, Tranter and Investec, a Term sheet was agreed to
       during late April 2012 setting out the mutually beneficial proposal whereby the Company
       provides Tranter with further financial assistance over a period of 18 months to enable them to
       meet their proposed restructured loan repayment obligations to Investec and thereby remove their
       current breach on the loan agreement.

        (c) Related party transaction (continued)
        In terms of the proposal Investec will remove all cash margin requirements and also restructure
        the repayment in such a manner that the required assistance from the Company does not impact
        on its short term cash requirements. The parties are currently working on finalizing the legal
        agreements and obtaining the required approvals to enter into the binding legal agreements.
        Finalization of this restructured financial support is being delayed as a result of the strategic
        review process the Company has initiated.
        Refer to note 6 for information on the loan advanced to Tranter.


Johannesburg
15 November 2012

Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)




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