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Operational, Financial and Corporate Update and Board Changes
Central Rand Gold Limited
(Incorporated as a company with limited liability under the laws of Guernsey,
Company Number 45108)
(Incorporated as an external company with limited liability under the laws of South Africa,
Registration number 2007/0192231/10)
ISIN: GG00B92NXM24
LSE share code: CRND JSE share code: CRD
("Central Rand Gold" or the “Company”)
OPERATIONAL, FINANCIAL AND CORPORATE UPDATE AND BOARD CHANGES
The Board of Directors (“the Board”) of Central Rand Gold (“CRG” or the “Company”) is pleased
to provide the following update to Shareholders.
Operational Update
Toll Treatment and Joint Venture Opportunities
The Company has entered into a binding Joint Venture Tolling Agreement (the “Tolling
Venture”) with a third party supplier of ore for the sourcing and processing of gold-bearing
material through the metallurgical plant at Central Rand Gold.
The Tolling Venture envisages the processing through the Company’s metallurgical plant of a
minimum of 18,000 tonnes per month, commencing from July 2016. The plant currently has
capacity for up to 20,000 tonnes per month and the intention of the parties in the Tolling
Venture is to fully utilise that capacity. The material processed under the Tolling Venture will
be of a similar nature and grade to the material, which has been historically processed through
the metallurgical plant.
Under the Tolling Venture, the third party material supplier will be responsible to source and
deliver gold bearing material to CRG’s metallurgical plant for processing by CRG. Under the
agreement, CRG will receive a graduated fee for processing the material in accordance with the
number of tonnes processed through the metallurgical plant (the “Processing Fee”).
The Company is excited by the formation of the Tolling Venture and looks forward to building
on the relationship with the third party supplier. In addition, the Company is presently
assessing further joint venture opportunities within the region surrounding the Company’s
metallurgical plant. In this regard, the Company is engaging closely with its strategic partner
Zhejiang Golden Machinery Plant (“ZGMP”).
As previously announced, the Company and ZGMP worked closely throughout 2015 regarding
potential metallurgical plant designs and configurations associated with the future exploitation
of the Company’s large-scale underground resources. In relation to the surface joint venture
opportunities currently under review, the Company is working with ZGMP to optimise the
existing metallurgical plant with the objective to increase tonnage throughput and efficiencies.
Representatives from ZGMP will be onsite at CRG in early June 2016 to progress these
opportunities to an investment decision stage. As soon as the Company, in consultation with
ZGMP, has finalised the preferred strategy it will update Shareholders with necessary details.
Short Term Open Pit Mining
As disclosed in previous announcements, due to the flooding of the Central Basin, the Company
has been forced to focus on mining surface and open pit operations. The Company has worked
hard to identify and exploit various surface accessible resources over the past 18 months since
the flooding of the Central Basin caused the suspension of the underground operations. The
Company has worked closely with its stakeholders to continue to maintain operations until the
Central Basin water table reduces sufficiently to enable underground mining to recommence.
Since the beginning of the year until suspension of the open pit operations in late May 2016,
68,077 tonnes were mined from the Company's open pits and other surface material sources,
at an average grade of 1.93g/t. However, due to recently experienced grade variability from the
surface operations, the Company has decided to cease open pit mining operations for the
immediate period and will focus on rehabilitation of opened up areas, as well as processing
material under the Tolling Venture. Notwithstanding this course of action, CRG continues to
identify and analyse further open pit and surface opportunities and retains the option to re-
access such areas if commercially viable.
Acid Mine Drainage (“AMD”) and Central Basin Water Table
The Company continues to actively engage with the Trans Caledon Tunnel Authority (“TCTA”)
regarding the ongoing de-watering of the Central Basin. Over the past several months, the
pump station and High Density Sludge plant (“HDS Plant”) have been running intermittently.
In particular, one of the Ritz pumps which was donated by CRG to the de-watering project has
experienced a degree of ‘down time’ over the first half of 2016, which was caused by ongoing
mechanical issues. However, the pump’s availability rates have improved over the past 3
months with May 2016 being its strongest month from an operational perspective since
January 2016. As at 25 May 2016, the water table measured at Central Rand Gold's operations,
was at approximately 148 vertical metres below surface.
As previously announced, in 2015 the HDS Plant underwent a series of upgrades to specific
components contained within the back end of the HDS Plant. Pleasingly, since these upgrades
have been completed, the HDS Plant has seen improved throughput. With the HDS Plant now
performing in line with nameplate specifications, the Company anticipates that dewatering
should once again accelerate during the winter months, assuming the mechanical issues with
the Ritz pump are rectified.
The Company is also pleased and encouraged by the significant amount of work being
conducted by the TCTA and the South African Government regarding the strategy to upgrade
the infrastructure used to dewater and treat the AMD. Under the present system adopted by
the TCTA, the AMD is cleaned, with the pH increased to 9 through the addition of lime. Further,
heavy metals are removed from the solution and gypsum is also added which has the effect of
reducing the salt content of the treated water but not removing the salts completely. The
treated water is then discharged into the Vaal River system.
Under the proposed long-term solution for AMD (the “Long Term AMD Solution”), which was
recently announced by Water Minister Nomvula Mokonyane, the salt content of the treated
AMD water will be further reduced through either reverse osmosis or an alternative
desalination technology. Once this process has occurred, it will enable the treated water to be
sold for safe commercial use as either industrial or potable water. The Long Term AMD Solution
will effectively turn AMD into a critical and reliable source of potable water to the water-short
Gauteng Province, which is the economic driver of South Africa.
Implementation of the Long Term AMD Solution has to be preceded by a full environmental-
impact assessment, which is expected to be concluded in 2017. The South African Government
has indicated that the long-term solution, which will incorporate the desalination technology,
will be commissioned in late 2019.
The Company is also closely following privately developed potential solutions for de-watering
and commercial application of AMD. The Company notes that there are several private sector
companies that have developed water treatment processes to extract valuable elements from
the AMD for application and commercial sale to the fertilizer and construction industries. The
by-product of such water treatment processes is potable water, which may be sold to industry
and municipalities. The Company will continue to monitor these developments to determine if
there is an opportunity for CRG to participate in the development and application of these
private sector water treatment processes. The Company will continue to keep shareholders
informed of any updates. The Company will ensure that background information relating to
these developments is uploaded to the Company’s website over the near term.
Appointment of Chief Executive Officer to SA subsidiary
The Board is pleased to advise that Lola Trollip has been appointed as Chief Executive Officer
of Central Rand Gold SA Proprietary Limited (“Central Rand Gold SA"), the Company’s operating
subsidiary, effectively immediately.
Ms Trollip, a financial executive with over 30 years of African and international experience in
the resources industry, joined CRG in late 2015 to lead the finance function as Chief Financial
Officer and as a member of the Executive Committee of the Company. She will now have overall
responsibility for the day-to-day operations of the business as Chief Executive Officer Central
Rand Gold SA and it is anticipated that she will be joining the Board of CRG as soon as all
necessary regulatory paperwork has been processed. Prior to Ms Trollip’s appointment as Chief
Executive Officer of Central Rand Gold SA, she was Chief Financial Officer of the Company.
The Board also announces the retirement of Mr. Allen Phillips from his role as Non-Executive
Director and Interim Chief Executive Officer, effective immediately. Mr Phillip’s will remain
involved with the Company going forward in a consulting capacity to ensure his continued
guidance with respect to the metallurgical function of the Company. The Company’s Interim
Chairman, Mr Nathan Taylor, thanked Mr Phillips for his contribution to CRG saying: “Allen has
helped guide CRG through a challenging time. He has made a valuable contribution to the
development of the Company generally and has played a particularly significant role in the
improved performance of the Company’s metallurgical plant and workforce. On behalf of all
CRG stakeholders, I thank Allen for his contribution and look forward to his future involvement
in a consulting capacity.”
Acquisition Opportunities
In addition to the work being done to actively pursue near term gold production opportunities
in and around the Company’s operation within the Witwatersrand area, the Board has resolved
to broaden its acquisition strategy to pursue opportunities throughout the African continent.
The Board is particularly interested in near term production assets across a number of
commodities including but not limited to precious metals and precious stones.
The Board is presently working with two parties regarding potential acquisition opportunities
within Sub-Sahara Africa. Whilst discussions are at a preliminary stage, both opportunities
exhibit characteristics which the Board considers appealing, namely near term cash flow
potential and low capital start-up costs. The Board will continue to advance these opportunities
and will advise the market as and when discussions are finalised.
Funding Discussions
Strategic Partnership with ZGMP
Over the past three months the Company has conferred with ZGMP regarding a potential
investment into Central Rand Gold (the “ZGMP Investment”). It is envisaged that the ZGMP
Investment will be applied to fund the growth initiatives which have been outlined above as
well as for general working capital purposes. Discussions regarding the size, structure and
timing of the ZGMP Investment remain ongoing but are expected to be finalised in the near term.
It is also contemplated that one or more of the Joint Venture opportunities will require a
capacity expansion to be conducted at CRG’s metallurgical plant. The size and cost of this
capacity expansion is still being considered by CRG and ZGMP. Once the necessary financial
modelling and engineering design work has been completed, ZGMP has proposed that it
manufacture and supply the capital goods from its facilities within China. As contemplated by
the MOU signed with ZGMP in 2014, the Company can elect to pay ZGMP through the issuance
of new ordinary shares in Central Rand Gold rather than in cash, subject to the required
shareholder approvals and applicable rules and regulations. This option would have the benefit
of reducing balance sheet strain while aligning the interests of Central Rand Gold and ZGMP. As
mentioned above, CRG will host representatives from ZGMP in early June 2016 to finalise a
decision regarding the growth opportunities and ZGMP Investment.
Bridging Finance and Subscription
Given the ongoing discussions with ZGMP and the continued progress regarding growth
opportunities, the Board has elected to complete a bridge funding (the “Bridge Funding”)
through a combined convertible securities and warrant issuance with Bergen Global
Opportunity Fund, LP, a New York based institutional fund. The Bridge Funding has raised
US$598,000, with the potential for an increase to up to US$4,098,000 million should both
parties agree. In addition, the Company has today undertaken a subscription to raise
US$200,000 through the subscription of 4,620,005 new ordinary shares at an issue price of 3
pence each (the "Subscription"). The details of the Bridge Funding and Subscription have been
separately announced today.
The Bridge Funding and Subscription will be used for general working capital purposes and the
installation of a refurbished milling circuit recently acquired by the Company.
Puno Gold Investments Proprietary Limited Update
As announced on 3 May 2016, the Company received correspondence from Puno Gold
Investments Proprietary Limited (“Puno”) relating to an application made by Puno to wind-up
CRG SA (the “Application”).
As announced on 11 April 2016, the Board believes this to be the latest strategy from Puno to
frustrate the operations of the Company. The Board considers the Application to be without
merit and has engaged legal advisers to defend the action. Shareholders will be kept fully
informed as the matter progresses.
The Company also eagerly awaits the judgement of the Supreme Court regarding the long
running dispute with Puno relating to the shareholder funding provisions relating to the
operation of Central Rand Gold SA. The Company and its Counsel remain confident of the
strength of case and will keep Shareholders fully informed as the matter progresses in the
Supreme Court.
About Zhejiang Golden Machinery Plant
ZGMP is one of China's largest private mining machinery manufacturers and is located in the
Zhejiang province. ZGMP has a significant and well established client list, with many of its
clients ranking amongst the world's largest gold and base metals producers, including ZiJin
Mining, Jiangxi Copper, Zhongjin Lingnan. The product list and manufacturing capabilities of
ZGMP are significant, with industry leading capabilities in crushing and grinding circuits,
mixing and flotation equipment, concentration and filtration equipment and hydrometallurgy
equipment. Furthermore, ZGMP has the capability to provide ancillary goods and services to its
clients including engineering services, building materials, metallurgy, nonferrous metal,
electric power, chemical industry and other basic industries. ZGMP has manufactured mining
and processing equipment for operating mines across the globe including Asia, Africa, North
America and Australia.
For further information, please contact:
Central Rand Gold +27 (0) 87 310 4400
Lola Trollip / Nathan Taylor
Panmure Gordon (UK) Limited – Nominated Adviser & Broker +44 (0) 20 7886 2977
Adam James / James Greenwood
Merchantec Capital – JSE Sponsor +27 (0) 11 325 6363
Marcel Goncalves / Monique Martinez
Jenni Newman Public Relations Proprietary Limited +27 (0) 11 506 735
Jenni Newman
Johannesburg
7 June 2016
Sponsor
Merchantec Capital
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