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Central Rand Gold and Hiria Group Company Limited enter into a Memorandum of Understanding and Operational Update
Central Rand Gold Limited
(Incorporated as a company with limited liability under the laws of Guernsey,
Company Number 45108)
(Incorporated as an external company with limited liability under the laws of South Africa,
Registration number 2007/019223/10)
ISIN: GG00B92NXM24
LSE share code: CRND JSE share code: CRD
("Central Rand Gold" or the “Company”)
CENTRAL RAND GOLD AND HIRIA GROUP COMPANY LIMITED ENTER INTO
A MEMORANDUM OF UNDERSTANDING FOR THE POTENTIAL SALE OF
CENTRAL RAND GOLD (NETHERLANDS ANTILLES) N.V. AND
OPERATIONAL UPDATE
1. Memorandum of Understanding
The board of directors of Central Rand Gold (“the Board”) advises that Central Rand Gold has entered
into a non-binding Memorandum of Understanding (“MOU”) with Hiria Group Company Limited (“Hiria”),
a Hong Kong registered company. The terms of the MOU contemplate the potential disposal of 100% of
the shares held by Central Rand Gold in its wholly-owned subsidiary, Central Rand Gold (Netherlands
Antilles) N.V. (the “Subsidiary”) to Hiria, for a cash consideration of USD150 million (the “Transaction”).
The Subsidiary owns the assets of the Central Rand Gold Group.
The MOU, which provides the framework to enable Hiria to undertake detailed due diligence on the
Subsidiary and its assets, is the result of recent detailed discussions between Central Rand Gold and
Hiria.
The MOU is subject to a number of conditions including:
- mutual completion of due diligence by both Central Rand Gold and Hiria;
- Central Rand Gold obtaining all necessary regulatory and exchange approvals for the potential sale
of the Subsidiary;
- Hiria obtaining relevant regulatory approvals;
- the entering into a formal share sale agreement for the sale of the Subsidiary.
Hiria has provided a high level representation to the Board that it has the resources and ability to effect
the Transaction. As part of the due diligence process, Central Rand Gold will undertake a detailed due
diligence on Hiria, including a review of Hiria’s financing capabilities.
Central Rand Gold and Hiria have agreed to a target completion date of 31 March 2015 for the
finalisation of all required due diligence and the execution of a share sale agreement.
The Board cautions that at this time there can be no certainty that the potential sale of the Subsidiary to
Hiria will be completed. The MOU with Hiria is not exclusive and the Board will continue to engage with
other parties who have recently expressed an interest to better understand the assets of Central Rand
Gold.
A further announcement relating to the Transaction will be made in due course.
About Hiria Group Company Limited
Hiria is a 100% owned subsidiary of Marsa (Canada) Group Holdings (“Marsa”), which is registered in
the British Columbia province of Canada. The main business of Marsa is to provide vehicle and yacht
financial leasing for its customers in the Columbia, Ontario and Quebec provinces of Canada. Marsa
owns more than HK$6.5 billion of assets. Marsa and its subsidiaries have been active investors in iron
and nickel mining operations throughout Indonesia, Philippines and Tanzania. Marsa has a strategy to
expand its mining interests across various commodities throughout Africa and Southeast Asia.
2. Operational Update
2.1 Acid Mine Drainage (“AMD”)
The High Density Sludge Plant (“HDSP”) has now been operational for five months. Central Rand
Gold continues to monitor the water level at its mining operations as well as the daily flow rate, being
the amount of water pumped out of the Central Basin from the HDSP. Overall, since July 2014, the
water levels at Central Rand Gold’s mining operations have risen by approximately 5.8 vertical
metres. The Company has observed that when the flow rate is maintained at approximately
60 million litres per day (“mlpd”), which equates to approximately 80% of nameplate capacity, a
reduction in the water level occurs. The HDSP ran at or around nameplate capacity between mid-
July 2014 and early August 2014 and accordingly, a reduction of approximately 1.5 vertical metres in
the Central Basin water levels was reported. This trend provides evidence that the HDSP is able to
de-water the Central Basin, even when the daily flow rate is only at 80% of the Ritz submersible
pump capacity.
The flow rate was reduced in mid-August 2014 as a result of the decision by the Trans Caledon
Tunnel Authority (“TCTA”) to strengthen the mechanical components of the two 42 million litre
thickeners at the HDSP. This upgrade was required in order to improve, manage and control the
AMD sludge and to ensure the longer term improved performance of the HDSP. During September
2014, a temporary upgrade to the thickeners was completed. The final upgrade is planned for
completion in early 2015. Until this upgrade has been completed, the daily flow rate is expected to
be between 48 and 60 mlpd. If the planned daily flow rate can be maintained, the Board believes
that the water level is not expected to change significantly during this time.
Given that the Ritz submersible pumps have performed reliably since July 2014, it has been agreed
that once the thickener upgrade has been completed, the TCTA will increase the flow rate to
84 mlpd. This represents a 17% increase on the original planned capacity of 72 mlpd. This increased
capacity will provide the HDSP with greater ability to accelerate the future dewatering in the Central
Basin to ensure that the underground AMD is, at a minimum, maintained at the Environmental
Critical Level. This will allow Central Rand Gold to de-water the Central Basin to at least 450 metres
below surface (“mbs”).
2.2 Mining operations
As reported in the 2014 interim report, the Company had reduced the production rate from the
underground mine due to the elevated water levels which currently sits at 152 mbs. The Board had
hoped that by the date of this announcement, the Company would have been able to re-access
some of its previously flooded and developed stoping areas. However, the inability to re-access
these areas has placed strain on the Company’s gold production and cash resources as the
Company has been forced to substitute higher grade underground ore with other lower grade
material, such as underground North Reef ore, old rock piles and material from tailings dams.
It is important to note that the Board remains extremely positive about the medium and long-term
viability of the Company’s current target mining area. The Board recognises that the current high
water level is a short-term challenge and remains confident in the ability of the HDSP to dewater the
Central Basin.
In light of this short-term setback, the Company has pursued a strategy of repositioning itself with
respect to primary ore source. The Company has, for the past two months, focussed on revisiting
and reassessing open pit targets that were mothballed on the commissioning of the underground
operation.
This temporary change in focus from underground operations brought about by the rising water
levels has allowed the Company to consider alternate approaches to mining these more technically
challenging surface resources. The introduction of mechanical ripping and other rock breaking
technology has opened up SAMREC Compliant Exploration Target material of between 91 000 and
350 000t of reef running up to 2.5g/t as set out in the table below.
SAMREC Compliant Exploration Target Schedule
Slot Target Area Reef Dip V. Depth Width Tonnage Range Approx. Grade
Slot 5 Pit 1 Cut 2 White Reef 40 deg 5m 90.00 6 000 to 13 000t 2.3g/t
Slot 5 Pit 1 Cuts 3-6 White Reef 40 deg 30m 90.00 10 000 to 55 000t 2.3g/t
Slot 7 Pit 2 Cut 1 White Reef 45 deg 5m 236.00 20 000 to 44 000t 2.9g/t
Slot 7 Pit 2 Cut 2-6 White Reef 45 deg 30m 236.00 40 000 to 180 000t 2.8g/t
Slot 4 K7 Top Kimberly Reef 45 deg 10m 105.00 5 000 to 22 000t 1.7g/t
Slot 4 K7 Middle Kimberly Reef 45 deg 10m 126.00 5 000 to 20 000t 1.8g/t
Slot 4 K7 Bottom Kimberly Reef 45 deg 10m 92.00 5 000 to 15 000t 1.7g/t
91 000 to 350 000t 2.5g/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 is ongoing, and includes trial mining and processing of this shallow target to establish
grade and orebody continuity, mineability, dilution and throughput characteristics.
In addition to the reactivation of existing surface Resources and Exploration Targets, the Company
has conducted a regional survey focussing on known surface gold sources. The study has identified
a number of interesting alternative and easily accessible target mining operations which may be
available to the Company. Given that a number of the target mining areas are outside Central Rand
Gold’s existing mining right areas, the Board is presently engaged in numerous commercial
discussions with a view to securing an option to mine these areas. These initiatives are focused on
maintaining the Company’s production rate to ensure the Company moves into a cash positive
position.
As there appears to be sufficient surface material available to sustain the existing operation at
similar levels to those originally planned, the Board has taken the decision to temporarily suspend
underground mining on its lease-hold. This will allow the operational team to focus its attention on
surface operations while the final upgrade of the thickeners at the HDSP plant is being completed,
which will allow the water table to be reduced so that ultimately the Company can re-access to the
high grade underground working areas.
2.3 Operational costs
The Board continues to focus on reducing the Company’s cost structure. Since January 2014, it has
been able to reduce the overall Head Office salaries and Board remuneration by 15%. Similarly, the
Company has reduced its overtime costs by 72% since January 2014 through efficiency
improvements and more rigorous scheduled maintenance programs. In addition, the Company has,
through the development of strategic alliances with other gold mining groups operating within the
Witwatersrand, been able to reduce the cost of high usage Metallurgical re-agents, notably steel
balls, by 12%. The Board will continue to focus on reducing the Company’s existing cost structures,
and will also make appropriate adjustments where the business focus changes (such as adjustments
to underground mining operations whilst the water level continues to impact the business).
3. Operational Funding
Given the ongoing operational review and recent approach from Hiria, the Board is also actively
reviewing its balance sheet and capital requirements to ensure it remains well funded to continue
operations and expedite completion of the Transaction. Further information will be provided to
shareholders, in due course.
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 20 years’ experience in precious metal exploration, mineral resource management and
evaluation.
For further information, please contact:
Central Rand Gold +27 (0) 87 310 4400
Johan du Toit / Nathan Taylor
Charles Stanley Securities Limited +44 (0) 20 7149 6478
Marc Milmo / Mark Taylor
Merchantec Capital +27 (0) 11 325 6363
Monique Martinez / Marcel Goncalves
Jenni Newman Public Relations +27 (0) 11 506 7351
Proprietary Limited Jenni Newman
Johannesburg
11 November 2014
Sponsor
Merchantec Capital
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