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Annual Results and Annual Report Release
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” or the “Group”)
Annual Results and Annual Report Release
Central Rand Gold today announces its annual results for the year ended 31 December 2015.
Full copies of the Company's Annual Report and Accounts, including the
Company Profile, Chairman’s Report, Corporate Governance, Sustainable
Development Report, Company Secretarial Confirmation, Remuneration
Committee Report, Directors’ Report, Auditor's Report and full Financial
Statements, will be available on the Company’s website
www.centralrandgold.com on 30 June 2016.
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 7351
Jenni Newman
Chairman’s report
The year 2015 was a challenging year for the Company, with a number of
key events occurring, such as:
- further improvement works carried out on the metallurgical plant;
- on-going suspension of underground mining due to the water table level;
- initial stabilisation of the water table followed by modest water
table level reductions;
- a change of senior management with the resignation of Johan du Toit;
and
- unsuccessful conclusion of the proposed sale of Central Rand Gold
(Netherlands Antilles) N.V. (“CRGNV”).
All of these events are over and above the ordinary course of business
activities at Central Rand Gold and have required significant focus and
attention from the Company’s board of directors (“the Board”) and
management. I believe that all those involved with Central Rand Gold
have done an excellent job in managing these extraordinary events whilst
maintaining their focus on day-to-day operations.
POTENTIAL SALE OF CENTRAL RAND GOLD (NETHERLANDS ANTILLES) N.V.
The Board and Executive Committee spent significant effort engaging with
four Asian companies, Hiria Group Company Limited ("Hiria"), Beijing
Ankong Investment ("Ankong"), Shengbang Jiabo Beijing)Consulting Company
Limited ("Shengbang") and Huili Resources Group Limited (“Huili”), regarding
the proposed sale of CRGNV. The four Asian investor groups (“Asian Investors”)
all performed due diligence with significant focus on the Company’s operations
and the performance of the Water Treatment Facility operated by the Trans
Caledon Tunnel Authority (“TCTA”).
In June 2015, the Company discontinued discussions with Ankong and
Shengbang, and focussed its attention and resources on progressing
discussions and negotiations with Huili and Hiria. The negotiations with
Huili and Hiria progressed slowly during the second half of 2015 driven
by significant uncertainty caused by volatile commodity prices and
difficult market conditions across the junior mining sector, along with
company specific factors such as the continued dewatering of the Central
Basin. Notwithstanding the Company’s significant efforts, neither Huili
nor Hiria presented an appropriately valued proposal free of conditions.
Consequently, in December 2015, the Company formally terminated the
discussions with Huili and Hiria. Given the time, effort and costs
expended on the sale process, it was extremely disappointing for all
those involved that a successful sale of CRGNV could not be achieved.
Nevertheless, the Company will continue to informally engage with Huili,
Hiria and other parties interested in investment opportunities involving
the Company and its operations. The Company’s significant gold resource
remains attractive to potential investors and partners, particularly
from the Asian region, and the Board is focused on extracting value
where possible for shareholders. In this regard, the Company has re-
entered discussions with one of the Asian Investors regarding a potential
investment into the Company. The discussions contemplate a strategic
investment into the Company rather than a sale of the Company’s shareholding
in CRGNV. The negotiation is progressing and is benefiting from the significant
level of due diligence and negotiation which was conducted with the Asian
Investor throughout 2015.
“UPS AND DOWNS”
It must be said that whilst we are yet to achieve one of our stated
goals which is to be a profitable gold producer, the Board is pleased
with progress being made at the Company’s operations. Indeed, amongst
the challenges facing Central Rand Gold, there are a number of positive
developments occurring with regard to the Company. Some of the more
notable developments which occurred during the year, and into 2016,
included:
- Continued dewatering of the Central Basin by the High Density Sludge
(“HDS”) plant operating by the Trans Caledon Tunnel Authority ("TCTA").
However, there were repeated instances of ‘down time’ and we expect
2016 to show a marked improvement in terms of pace of dewatering of
the basin. Further, we were delighted by the unveiling of the long-
term solution for AMD (the “Long Term AMD Solution”) as announced by
the Minister of Water and Sanitation, Nomvula Mokonyane. The Long Term
AMD Solution will most likely see the installation of a reverse osmosis
circuit to reduce the salt content of the treated AMD water to a level
where it can be sold for safe commercial use as either industrial or
potable water.
- The metallurgical plant, having long been the Company’s ‘Achilles
heel’, performed at or around expectation in terms of recovery and
throughput in 2015. However, we need to remind ourselves that the
metallurgical plant requires continued investment to ensure operating
performance remains of a high standard. To this end, the Company has
recently replaced Mill 1 with a newly installed and fully refurbished
mill, which was acquired from Jet Demolition Proprietary Limited in
February 2016. The Company will continue to replace, repair and improve
the components of the metallurgical plant over the medium term.
- With the flooding and consequential closure of the underground mine
in 2014, pending the dewatering programme, the Company embarked on an
intense and systematic exploration and evaluation programme to
identify and secure sufficient surface material to sustain operations
across the short- to mid-term. The Company has identified numerous
surface opportunities including open pit deposits, shallow underground
deposits as well as gold bearing sand and slime material. The Company
continues to progress feasibility test work and advancing commercial
negotiations regarding these opportunities. However, it must be said
that the identification and sourcing of reliable and economic gold
bearing ore is a difficult and time intensive process.
- The negotiation and execution in 2016 of a Joint Venture Tolling
Agreement (the “Tolling Venture”) with a third party supplier of ore
for the processing of gold-bearing material through the Company’s
metallurgical plant has been positive. The Tolling Venture will enable
the Company to maintain operations with a steady and reliable feedstock
whilst it continues to pursue other growth opportunities and awaits
the dewatering of the central basin. In light of the Tolling Venture,
the Company elected to temporarily suspend mining at its open pit
operations, and will focus on rehabilitation in 2016.
- The continued engagement with Zhejiang Golden Machinery Plant (“ZGMP”)
to optimise and potentially expand the metallurgical plant is a
significant positive for the Company. ZGMP have recently visited the
Company’s metallurgical plant and we will seek their involvement in
assessing optimisation and expansion options relating to the metallurgical
plant. The Group have entered a non-binding Letter of Understanding for a
share placement of up to US$4.0 million with Zhejiang Golden Machinery Plant
(“ZGMP”) with due diligence currently being undertaken.
- The Board completed a bridge funding (the “Bridge Funding”) through a
combined convertible securities and warrant issuance with Bergen
Global Opportunity Fund, LP. The Bridge Funding raised US$598,000,
with the potential for an increase of up to US$4,098,000.
- The Company is also pursuing a variety of acquisition opportunities
across a number of commodities including but not limited to precious
metals and precious stones. The Board will continue to advance these
with a view to expanding and diversifying the Company’s asset portfolio.
PUNO
As I commented last year, the situation with Puno Gold Investments
Proprietary Limited (“Puno”), our Black Economic Empowerment partner,
remains a work in progress. The Company was successful in its appeal of
the 2013 decision and we now look forward to the relevant issues being
fully considered by the Courts and eagerly await the judgement which we
hope will fully resolve the dispute with Puno.
After the successful appeal of the 2013 decision, Puno applied to the
High Court to wind-up Central Rand Gold South Africa Proprietary Limited
(“Central Rand Gold SA”), a subsidiary of Central Rand Gold, on grounds
of Sections 344(f) and 345 of the SA Company’s Act. The Board considers
the Application to be without merit and has filed the necessary paperwork
with the High Court to defend Puno’s application. The Board believes
this to be the latest strategy from Puno to frustrate the operations of
Central Rand Gold SA and the Board remains firm in its resolve to defend
the assets of the Company from Puno’s actions.
It is with optimism and enthusiasm that the Board looks forward to the
finalisation of the above disputes with Puno which will allow the Board
and senior executives to direct their full energies towards the growth
of the business.
SAFETY
Our safety record improved in 2015 with only three lost time injuries
being reported. This progress is welcomed after implementing improvements
to our already rigorous and diligent safety protocols following the
Company’s first fatality in 2014.
ACID MINE DRAINAGE (“AMD”)
During the last quarter of 2015, the HDS plant underwent a process of
upgrading the two thickeners. The thickener upgrades to the HDS plant
were completed in December 2015 and the pumping rate has now increased
from 72 million litres per day to 84 million litres per day.
At 25 May 2016, the water table measured at Central Rand Gold’s operations
was at approximately 148 vertical metres below surface (“vmbs”). We anticipate
that we will be able to access Central Rand Gold’s underground mining areas
when the water table is approximately 185 vmbs which, following a period of
rehabilitation, should enable Central Rand Gold’s re-equipping and stabilising
of the underground mining operations to re-commence during 2019.
MINING UPDATE
Highlights
• Underground production on the Main and North Reefs has not recommenced
since it was halted in October 2014 as a result of the rising water
level in the Central Basin.
• Open Pit production was 204,916 tonnes at an average grade of 1.89g/t.
Production
The following table shows key mining statistics for 2015, comparing the
actual statistics with those achieved in 2014.
2015 2014 Difference
Metres Metres Metres
(m) Grade (m) Grade (m) Grade
Activity
Tonnes (g/t) Tonnes (g/t) Tonnes (g/t)
(t) (t) (t)
Waste Development (m) - 313 (313)
Reef Development (m) - 200 (200)
Total (m) - 513 (513)
Stoping (t) - - 99,546 3.14 (99,546) (3.14)
Open Pits (t) 204,916 1.89 69,747 2.41 135,169 (0.52)
Total Tonnes 204,916 169,293 35,623
No underground mining took place during the 2015 financial year.
Monitoring of pumps, fans and water levels takes place on a daily
basis, with the water levels not subsiding to the levels required
for the recommencement of underground mining.
Mining in 2015 consisted of open pit mining, mainly concentrating on
Slots 5 and 7, in and around the Johannesburg area.
The in-situ grades are approximately 33% lower than that of the
underground operations, but can still be mined economically at a cut-
off stripping ratio of approximately 7:1. The open pits were mined using
contracted yellow machines, with Central Rand Gold SA mining personnel
overseeing the operations. Several tonnes from redundant slimes dams and
sands were also trammed to Central Rand Gold SA for processing.
METALLURGICAL UPDATE
Production
The Mill 3, which was purchased in 2014, came on line during 2015 and
this enhanced the production throughput. Unfortunately, as previously
mentioned, other factors such as the temporary cessation of underground
mining, which reduced the availability of quality ore, as well as the
inconsistent feed of mined slimes and sands, lessened the expected impact
of the new mill.
Plant
production Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Surface (Open
Pit) (tonnes) 10,416 13,918 10,670 5,199 9,682 5,137 9,007 8,315 8,563 14,345 15,746 11,546
Slimes Dams
(tonnes) 86 1 3,432 8,666 5,652 6,930 5,530 6,582 5,802 1,919 638 3,571
Other (tonnes) 1,257 1,469 203 769 253 4,243 327 1,800 320 - 455 1,312
Total tonnes
processed 11,759 15,388 14,305 14,634 15,587 16,310 14,864 16,697 14,685 16,264 16,839 16,429
Plant
Availability
(%) 99 94 91 80 83 87 82 86 81 91 84 74
Gold recovery throughout the year was somewhat variable, largely due to
the changing nature of the feedstock. The move from Main Reef to North
Reef to sands and slimes and open pit oxides placed the equilibrium of
the plant under strain, delivering an average recovery for the year of
64%.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Plant 76 64 74 65 71 51 54 63 52 63 71 66
recovery (%)
The leach tank installation was completed by July 2015. The thickener
project has not yet commenced and is still on hold, as the sale of CRGNV
was still being negotiated late in November 2015. This project will be
scheduled for the future.
GEOLOGICAL UPDATE
Resources
The SAMREC compliant resource base of the Company was updated in 2014
to 9.90 Moz of contained gold. There were no further changes during the
2015 financial year.
FINANCIAL REVIEW
Results
The net profit for 2015 financial year amounted to US$1.4 million (1.58
cents per share) against a loss of US$15.3 million (17.51 cents per
share) in 2014. The loss before interest, tax and depreciation totalled
US$3.0 million, a significant reduction against the US$8.2 million for
2014. This net profit is largely attributed to the following factors:
- Revenue in Rand terms increased 21% due to a 15% higher gold sale
volume at 7,017 ounces (2014: 6,146 ounces) from surface pits,
improved plant availability and a stronger average realised Rand
equivalent gold price. However, in US dollar terms, revenues reduced
by 1.5% given the devaluation of the Rand;
- Reduction in operating and overhead costs reflecting both cost
savings and the effect of the Rand devaluation on costs in US Dollar
terms;
- Reduction in labour hire (Sekgwa Mining Services Proprietary Limited
contract terminated in 2014) and reduction in salary cost by 17.6%; and
- Gain on fair value of convertible loan note derivatives of US$7.1 million
compared to a loss of US$5.1 million in 2014.
As a consequence of the increased ounces and cost reduction, all-in cash
operating costs per ounce decreased to US$1,643 per ounce against the
prior year’s US$2,521 per ounce.
Cash and cash equivalents and funding
The cash and cash equivalent balance is reported at US$0.56 million as
at 31 December 2015 (2014: US$0.91 million). The lower cash balance is
a result of operating cash outflows of US$1.42 million reflecting
operating losses, foreign currency losses on translation of cash balances
of US$0.15 million, partly offset by equity share issues of US$1.20
million in 2015.
On 18 June 2015, the Company issued 6,015,000 new Ordinary Shares of
£0.01 each at a price of 10 pence per Ordinary Share, which raised
approximately US$0.94 million (£0.60 million).
On 24 June 2015, the Company issued a further 2,000,000 new Ordinary
Shares of £0.01 each at a price of 10 pence per Ordinary Share, which
raised approximately US$0.32 million (£0.20 million).
There remains a material uncertainty in respect of the Company’s ability
to continue as a going concern. For further consideration, please refer
to the basis of preparation set out in note 2 of the annual financial
statements.
Post Balance Sheet Events
Operating
The Mill 1 experienced mechanical performance issues and subsequent to
year-end failed. Central Rand Gold SA has identified, purchased and is
currently installing another mill in its place. This project should be
completed in mid-July 2016.
Central Rand Gold SA has entered into an agreement with a third party
to toll treat their material for a period of 12 months. To this end,
open pit mining has been halted in the interim and focus will be on the
rehabilitation, drilling and sampling of other areas within the Mining
Rights of Central Rand Gold SA, as well as identification and negotiations
for third party owned pits. Central Rand Gold SA will also address the backlog
of rehabilitation of the open pit areas that have been mined out and are
uneconomical to mine at further depths. To this end, various interactions have
taken place with the landowners. Central Rand Gold SA has a test site for the
backfilling of one of their pits and has entered into a Joint Venture
with D & H Recycling in order to do so. Should this be successful, the
methodology can be duplicated throughout South Africa for all other
mined out areas.
Funding
In order to strengthen its cash balances, the Company has in February 2016,
subsequent to the year-end, completed a fundraising of US$1.7 million.
The Board has completed a 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 raised US$598,000,
with the potential for an increase to up to US$4,098,000 should both parties
agree. In addition, the Company undertook a subscription on 13 June 2016
to raise US$200,000 through the subscription of 4,620,005 new ordinary
shares at an issue price of 3 pence each.
The Group have entered a non-binding Letter of Understanding for a share
placement of up to US$4.0 million with Zhejiang Golden Machinery Plant
(“ZGMP”) with due diligence currently being undertaken.
The Redstone Convertible Loan Notes mature in August 2016. Redstone have
provided a written undertaking to extend the maturity of the Notes to
at least July 2017 subject to concluding negotiations regarding revisions
to the terms of conversion in the coming months. The Directors, based
on discussions with representatives of Redstone, fully expect that the
Notes will ultimately be converted rather than called for payment.
Puno dispute
As already mentioned in this Report, Puno lodged an application in terms
of Section 344(f) and 345 of the Companies Act against Central Rand Gold
SA, which, upon advice from our legal advisors, we are opposing. Answering
affidavits have been lodged. The time period for Puno to file their replying
affidavit lapsed on 22 June 2016. Puno’s opportunity to file further affidavits
has now lapsed and the Company awaits Puno’s confirmation whether they intend
to persist in their application.
APPRECIATION
I would like to thank Johan du Toit, who resigned as Chief Executive
Officer and Director in December 2015. Johan played a significant role
in the shaping of the Company during his seven year tenure, firstly in
the role of Chief Financial Officer and in latter years as the Chief
Executive Officer.
Lola Trollip has now assumed the role of Chief Executive Officer of
Central Rand Gold SA and she will be joining the Board of Central Rand
Gold as an Executive Director as soon as all the necessary regulatory
paperwork has been processed. We look forward to the energy and focus
she will bring to the role. Lola has over 30 years’ experience in the
African mining industry and deep financial skills which will be
valuable for the Company in its quest to become profitable.
I also express my appreciation to Allen Phillips, who recently resigned
in June 2016, for his valuable guidance during his tenure as Non-
executive Director.
Further, I welcome to the Board a new Non-executive Director, Mark Austin.
Mark is a geologist with extensive experience in exploration and mining
geology as well as considerable management experience having managed various
gold and diamond mines across Africa. Mark was appointed on 15 December 2015.
Finally, I thank the shareholders of Central Rand Gold for their continued
support and believe the Company is in a strong position to embark upon the
2016 financial year.
Nathan Taylor
Chairman
Statement of Financial Position as at 31 December 2015
Group
2015 2014
Notes US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 2,271 3,592
Intangible assets 2,114 2,830
Security deposits and guarantees 46 191
Environmental guarantee investment 2,584 3,177
Loans receivable 7,236 8,646
14,251 18,436
Current assets
Security deposits and guarantees 26 65
Prepayments and other receivables 480 1,239
Inventories 120 76
Cash and cash equivalents 556 914
Derivative asset - 720
1,182 3,014
Total assets 15,433 21,450
EQUITY
Attributable to equity holders of the
parent
Share capital 9 26,617 26,490
Share premium 9 224,037 222,963
Share-based compensation reserve 28,238 28,238
Treasury shares (6) (6)
Foreign currency translation reserve (28,993) (29,534)
Accumulated losses (260,117) (261,559)
(10,224) (13,408)
Non-controlling interest - -
Total equity (10,224) (13,408)
LIABILITIES
Non-current liabilities
Environmental rehabilitation 3,676 4,904
Loan payable 7,236 14,418
10,912 19,322
Current liabilities
Trade and other payables 6,999 6,911
Royalties taxation payable 140 177
Loan payable 6 6,959 -
Derivative liability 6 647 8,448
14,745 15,536
Total liabilities 25,657 34,858
Total equity and liabilities 15,433 21,450
Statement of Profit or Loss for the year ended 31 December 2015
Group
2015 2014
Notes US$'000 US$'000
Revenue 8,093 8,212
Production costs (6,079) (9,438)
Employee benefits expense (2,252) (3,223)
Directors' emoluments (468) (717)
Inventory write down - (705)
Operating lease expense (872) (787)
Operational expenses (505) (502)
Other expenses (1,098) (1,702)
Other income and gains 305 543
Foreign exchange transaction
(losses)/gains (75) 129
Loss before interest, tax and depreciation (2,951) (8,190)
Depreciation (425) (460)
Impairment of assets (346) (158)
Fair value movement in embedded derivative 6 7,081 (5,108)
Finance income and investment income 1,149 1,233
Finance costs (3,066) (2,585)
Profit/(loss) before income tax 1,442 (15,268)
Income tax expense - -
Profit/(loss) for the year 1,442 (15,268)
Profit/(loss) is attributable to:
Non-controlling interest - -
Equity holders of the parent 1,442 (15,268)
1,442 (15,268)
Earnings/(loss) per share for loss
attributable to the equity holders during
the year (expressed in US cents per share)
Basic earnings/(loss) per share 1.58 (17.51)
Diluted loss per share (2.23) (17.51)
Statement of Comprehensive Income for the year ended 31 December 2015
Group
2015 2014
US$'000 US$'000
Profit/(loss) for the year 1,442 (15,268)
Other comprehensive income/(loss):
Item that may be reclassified subsequently
to profit or loss
Exchange differences on translating foreign
operations 541 (92)
Other comprehensive income/(loss) for the
period, net of tax 541 (92)
Total comprehensive income/(loss) for the
period 1,983 (15,360)
Total comprehensive income/(loss) is
attributable to:
Non-controlling interest - -
Equity holders of the parent 1,983 (15,360)
1,983 (15,360)
Attributable to equity holders of the Group
Share- Foreign Non-
Ordinary based currency Accumula- controll-
share Share compensa- Treasury transla- ted ing Total
capital premium tion shares tion losses Total interest equity
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
reserve reserve
Balance at
31 December 2013 25,604 213,377 28,224 (6) (29,442) (246,291) (8,534) - (8,534)
Total comprehensive
income for the year
Loss for the year - - - - - (15,268) (15,268) - (15,268)
Other comprehensive
income
Foreign currency - - - - (92) - (92) - (92)
Transactions with
owners, recorded
directly in equity
Issue of shares:
Capital raising 886 9,586 - - - - 10,472 - 10,472
Employees' and
Directors' share-
based payments and
options - - 14 - - - 14 - 14
Balance at
31 December 2014 26,490 222,963 28,238 (6) (29,534) (261,559) (13,408) - (13,408)
Attributable to equity holders of the Group
Share- Foreign Non-
Ordinary based currency Accumula- controll-
share Share compensa- Treasury transla- ted ing Total
capital premium tion shares tion losses Total interest equity
US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000 US$ '000
reserve reserve
Balance at
31 December 2014 26,490 222,963 28,238 (6) (29,534) (261,559) (13,408) - (13,408)
Total comprehensive
income for the year
Profit for the year - - - - - 1,442 1,442 - 1,442
Other comprehensive
income
Foreign currency - - - - 541 - 541 - 541
adjustments with
Transactions
owners, recorded
directly in equity
Issue of shares:
Capital raising 127 1,074 - - - - 1,201 - 1,201
Balance at
31 December 2015 26,617 224,037 28,238 (6) (28,993) (260,117) (10,224) - (10,224)
Statement of Cash Flow for the year ended 31 December 2015
Group
2015 2014
Notes US$'000 US$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax 1,442 (15,268)
Adjusted for : (15,268)
Depreciation 425 460
Employment benefit expenditure (share-based
payments) - 14
Profit on disposal of property, plant and
equipment (146) (17)
Impairment of inventory - 705
Impairment of assets 346 158
Net loss/(gain) on foreign exchange 75 (129)
Finance income (1,149) (1,233)
Finance costs 3,066 2,585
Fair value movement in embedded derivative 6 (7,081) 5,108
Changes in working capital
Decrease/(increase) in prepayments and other
receivables 689 (325)
(Increase)/decrease in inventory (44) 129
Increase/(decrease) in trade and other
payables 173 (60)
(Decrease)/increase in provisions - 809
Cash flows used in operations (2,204) (7,064)
Finance income 203 273
Finance costs 580 -
Sundry income - (1,610)
Net cash used in operating activities (1,421) (8,401)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (92) (1,049)
Proceeds from disposal of property, plant
and equipment 180 186
Increase in environmental guarantee deposit 65 (53)
Net cash from/(used) in investing activities 153 (916)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares for cash 9 1,261 4,254
Cost relating to the issue of shares 9 (60) (257)
Net proceeds from exercise of share options - 3,732
Net cash from financing activities 1,201 7,729
Net decrease in cash and cash equivalents (67) (1,588)
Cash and cash equivalents at 1 January 914 2,475
Effects of exchange rate fluctuations on
cash balances (291) 27
Cash and cash equivalents at 31 December 556 914
Notes to the Annual Financial Statements
1. General information
Central Rand Gold Limited (“Central Rand Gold”) is a Guernsey
incorporated company and it is also registered in South Africa as an
external company. One of its subsidiaries, Central Rand Gold (Netherland
Antilles) N.V. (“CRGNV”), was incorporated in the Netherlands Antilles.
Central Rand Gold's operating subsidiary is Central Rand Gold South
Africa Proprietary Limited (“Central Rand Gold SA”). Central Rand Gold
has a primary listing on the London Stock Exchange (“LSE”) and a secondary
listing on JSE Limited (“JSE”).
Central Rand Gold complies with the company laws of its place of
incorporation being Guernsey and the company laws of the place of its
external registration being South Africa. One of its subsidiaries, CRGNV,
is incorporated in the Netherlands Antilles, therefore the Group is also
impacted by the company laws of the Netherlands Antilles.
The financial information for the year ended 31 December 2015 set out in
this announcement does not constitute the Company’s statutory accounts.
These financial statements included in the announcement have been
extracted from the Group annual financial statements for the year ended
31 December 2015. The financial statements have been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards adopted for use in the European Union.
However, this announcement does not itself contain sufficient information
to comply with IFRS.
The auditor has issued his opinion on the Group’s financial statements
for the year ended 31 December 2015 which is unmodified but does contain
an emphasis of matter paragraph in respect of the matters referred to
under note 2 ‘Going concern’ and is available for inspection at the
Company’s registered address and will be posted to the Group’s website.
The emphasis of matter paragraph is presented below:
Emphasis of matter – Going concern
In forming our opinion on the financial statements, which is not modified,
we have considered the adequacy of the disclosures set out in note 2 to
the financial statements concerning the Group’s ability to continue as a
going concern. As explained in note 2, the ability of the Group to
continue as a going concern is dependent on the Group securing access to
sufficient additional funding and extending the repayment terms of
existing loan notes or the loan note holders converting the loan notes
into equity, to support the Group’s cash flow projections. Although the
Directors remain confident that the necessary funding will be secured
and that the existing loan note holders will exercise their conversion
rights or extend the loan note maturity date to at least July 2017, there
are no binding agreements currently in place. These factors, together
with the other matters explained in note 2, indicate the existence of a
material uncertainty that may cast significant doubt on the Group’s
ability to continue as a going concern. The financial statements do not
include the adjustments that would result if the Group was unable to
continue as a going concern.
2. Basis of preparation
The consolidated financial statements have been prepared in accordance
with the recognition and measurement criteria of International Financial
Reporting Standards and Interpretations (collectively “IFRS”) issued by
the International Accounting Standards Board (“IASB”) as adopted by the
European Union (“EU”). However, this announcement does not itself contain
sufficient information to comply with IFRS. The Company will publish full
financial statements that comply with IFRS on 30 June 2016.
The consolidated financial statements are presented in United States
Dollars (“US$” or “US Dollar”) and rounded to the nearest thousand. The
functional currency of the parent company is the US Dollar. The
functional currency of its principal subsidiary, Central Rand Gold SA is
the South African Rand (“ZAR” or “Rand”).
Going concern
The Group had net current liabilities at 31 December 2015 of
US$13.6 million, including US$7.2 million of loan notes with Redstone
Capital Limited which mature in August 2016 and US$7.0 million of trade
and other payables which include amounts that are overdue and are being
settled over the next 12 months under formal and informal arrangements
with creditors. The ability of the Group to continue as a going concern
is dependent on the Group securing access to sufficient additional
funding and extending the repayment terms of existing loan notes or the
loan note holders converting the loan notes into equity, to support the
Group’s cash flow projections.
In April 2016, following the decision of the High Court of South Africa
to uphold the Company's appeal with costs in relation the dispute with
Puno Gold Investments Proprietary Limited ("Puno"), Puno submitted an
application to wind up the Group’s South African operating subsidiary.
As previously announced, the Board believes this to be the latest
strategy from Puno to frustrate the operations of the Company and
considers the application to be without merit, has engaged legal advisers
to defend the action and has submitted its legal rejection of the
application. The time period for Puno to file their replying affidavit
lapsed on 22 June 2016. Puno’s opportunity to file further affidavits
has now lapsed and the Company awaits Puno’s confirmation whether they
intend to persist in their application.
In May 2016, the Group ceased open pit mining operations and will instead
temporarily focus on toll treatment operations under a binding tolling
agreement with a third party which is expected to be cash flow generative.
Underground mining is expected to recommence in 2019 following the
dewatering program. As part of the reorganisation of operations, the
Group has initiated a number of cost reduction measures.
Since the year end, the Group has raised US$1.6 million (net) through
share placements and drawn down US$0.6 million of bridge finance under
a convertible loan note facility (‘CLN’) with Bergen Global Opportunity
Fund, LP (‘Bergen’) for working capital purposes. Under the terms of the
agreement, the Group can draw down up to US$4.0 million subject to
agreement by both parties. In addition, the Group have entered a non-
binding Letter of Understanding for a share placement of up to US$4.0
million with Zhejiang Golden Machinery Plant (“ZGMP”) with due diligence
currently being undertaken. The investment by ZGMP remains subject to
final agreements being concluded and shareholder approval. The Company
has also re-entered discussions, which are still in an early stage, with
one of the Asian Investors regarding a potential investment into the
Company. The recent funding, together with further draw downs under the
Bergen CLN or ZGMP investment, if concluded, would provide the Group
with funding to normalize its working capital position and in conjunction
with the tolling arrangement provide future working capital. In addition,
the Directors are progressing negotiations with another third party for
additional funding and remain confident that such funding can be
concluded on terms acceptable to both parties.
The Group’s Senior Secured Loan Notes of US$7.25 million principal (‘the
Notes’), held by the Group’s largest shareholder Redstone Capital Limited
(‘Redstone’), fall due for maturity in September 2016. Redstone have
provided a written undertaking to extend the maturity of the Notes to at
least July 2017 subject to concluding negotiations regarding revisions
to the terms of conversion in the coming months. The Directors, based on
discussions with representatives of Redstone, fully expect that the Notes
will ultimately be converted rather than called for payment.
The Directors have prepared cash flow forecasts for a period of at least
12 months from the date these financial statements were approved, which
show that the Group is able to meet its liabilities as they fall due.
However, the cash flow forecasts are dependent upon the Group
successfully concluding the ZGMP investment or Bergen advancing further
funds under the CLN and the tolling arrangement being concluded. The
Group’s ability to meet liabilities as they fall due also remains
dependent upon the Group being able to manage its creditor relationships
and make necessary payments to trade creditors until the funding is
concluded. The cash flow forecasts are further dependent upon Redstone
electing to convert its Loan Notes or concluding the renegotiation of
terms such that the maturity date is deferred until at least July 2017.
In addition, the Group’s ability to trade remains dependent upon the
South African Courts rejecting Puno’s application to place the Group’s
operating subsidiary into liquidation.
Although the Directors remain confident that the necessary funding will
be secured and that the existing loan note holders will exercise their
conversion rights or extend the loan note maturity date to at least July
2017, there are no binding agreements currently in place. Whilst the
Board remains confident that, having assessed each of these factors, the
Group will be able to address each of these matters satisfactorily to
meet its liabilities as they fall due, the Directors have concluded that
the above circumstances give rise to a material uncertainty that may cast
significant doubt on the Group’s ability to continue as a going concern
and it may therefore be unable to realise its assets and discharge its
liabilities in the normal course of business. Nevertheless, after taking
account of the Group’s funding position and its cash flow projections,
and having considered the risks and uncertainties associated with the
forecasts, the Directors have a realistic expectation that the Group will
have adequate resources to continue in operational existence for at least
12 months from the date of approval of these financial statements. For
these reasons, the Directors continue to prepare the financial statements
on a going concern basis, and the financial statements do not include
any adjustments that would result in the going concern basis of
preparation being inappropriate.
3. Accounting policies
These results have been prepared on a basis that is consistent with the
accounting policies applied by the Group in its audited consolidated
financial statements for the year ended 31 December 2014 and which will
form the basis of the 2015 annual report.
(a) New and amended standards adopted by the Group
In 2015 the Group adopted the amendments to IFRS 2 ‘Share-based Payment’,
IFRS 3 ‘Business Combinations’, IFRS 8 ‘Operating Segments’, IFRS 13
‘Fair Value Measurement’, IAS 16 ‘Property, Plant and Equipment, IAS 19
‘Defined Benefit Plans: Employee Contributions, IAS 24 ‘Related Party
Disclosures, IAS 38 ‘Intangible Assets’ and IAS 40 ‘Investment Property’.
These have had no significant impact on the Group’s results.
(b) New standards, amendments and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations
are effective for annual periods beginning after 1 January 2015, and
have not been applied in preparing these consolidated financial
statements. Those which may be relevant to the Group are set out below.
The Group does not plan to adopt these standards early.
The amendments to IFRS 5 ‘Non-current Assets Held for Sale and
Discontinued Operations’, ‘IFRS 7 ‘Financial Instruments: Disclosures’,
IFRS 10 ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’,
IFRS 12 ‘Disclosure of Interests in Other Entities’, IFRS 15 ‘Revenue from
Contracts with Customers’, IFRS 16 ‘Leases’, IAS 1 ‘Presentation of Financial
Statements’, IAS 12 ‘Recognition of Deferred Tax Assets for Unrealised Losses’,
IAS 16 ‘Property, Plant and Equipment’, IAS 19 ‘Employee Benefits’, IAS 27
‘Separate Financial Statements’, IAS 28 ‘Investments in Associates and Joint
Ventures’, IAS 34 ‘Interim Financial Reporting’, IAS 38 ‘Intangible Assets’
and the Disclosure Initiative: Amendments to IAS 7 are effective for
accounting periods beginning on or after 1 January 2016 but with early
adoption permitted. The adoption is not expected to have a significant impact
upon the Group’s net results, net assets or disclosures.
IFRS 9 ‘Financial Instruments’ replaces IAS 39 Financial Instruments:
Recognition and Measurement. The standard includes requirements for
recognition and measurement, impairment, derecognition and general hedge
accounting. It uses a single approach, based on how an entity manages
its financial instruments (its business model) and the contractual cash
flow characteristics of the financial assets, to determine whether a
financial asset is measured at amortised cost or at fair value. It
requires a single impairment method to be used, replacing the numerous
impairment methods in IAS 39 that arose from the different classification
categories. It also removes the requirement to separate embedded
derivatives from financial asset hosts. The standard introduces new
requirements for an entity choosing to measure a liability at fair value
to present the portion of the change in its fair value due to changes in
the entity’s own credit risk in the other comprehensive income section
of the statement of comprehensive income, rather than within profit or
loss. This new standard may impact the classification and measurement of
financial assets and the Group is in the process of assessing the impact.
The standard is effective for year ends beginning on or after
1 January 2018.
4. Directorate
During the financial period under review, the composition of the
Board of Directors was as follows:
Name Position
Mr Nathan Taylor Non-executive Chairman
Mr Johan du Toit1 Chief Executive Officer
Mr Jason Hou Non-executive Director
Mr Allen Phillips2 Non-executive Director
Mr Mark Austin3 Non-executive Director
1 Mr Johan du Toit resigned from the Board on 31 December 2015.
2 Mr Allen Phillips resigned from the Board and its committees on 6 June 2016.
3 Mr Mark Austin was appointed to the Board on 15 December 2015.
5. Segment reporting
An operating segment is a component of an entity that engages in business
activities from which it may earn revenues and incur expenses, whose
operating results are regularly reviewed by the entity’s chief operating
decision maker to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial
information is available. The entity’s chief operating decision maker
reviews information in one operating segment, being the acquisition of
mineral rights and data gathering in the Central Rand Goldfield of South
Africa, therefore management has determined that there is only one
reportable segment. Accordingly, no analysis of segment revenue, results
or net assets has been presented. No corporate or other assets are
excluded from this segment.
6. Loans payable – Redstone Capital Limited
Central
Rand
Redstone Gold’s
’s debt debt
conversi conversi
on on
Debt Warrant Option option option Total
US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000 US$ ‘000
At 1
January
2014 5,148 1,434 1,189 2,749 - 10,520
Fair value
loss/(gain) - 1,043 1,469 3,316 (720) 5,108
Derivative
exercise - (94) (2,658) - - (2,752)
Interest 1,204 - - - - 1,204
Cash paid (580) - - - - (580)
At 31
December
2014 5,772 2,383 - 6,065 (720) 13,500
Fair value
loss/(gain) - (1,905) - (5,896) 720 (7,081)
Interest 1,767 - - - - 1,767
Cash paid (580) - - - - (580)
At 31
December
2015 6,959 478 - 169 - 7,606
*The prior year loan balance of $5,772,000 was shown in non-current
loans payable in the statement of financial position.
7. Related party transactions
On 19 August 2013, shareholders of the Company approved the issue to
Redstone, of US$7.25 million convertible loan note instruments bearing
8%p.a. coupon interest payable on a quarterly basis with a maturity
date of August 2016 (“the Convertible Loan Note”). In addition to this,
the Company entered into an agreement to issue Redstone warrants
equivalent to 50% of the Convertible Loan Note (“the Warrant”) and an
option agreement (the “Option Agreement”) that, in the event that the
Company undertook an open offer, Redstone will have an option to
subscribe for such additional number of Ordinary Shares to ensure that
its percentage holding of the issued share capital of the Company would
remain unchanged (assuming the full conversion of the Convertible Loan
Notes) following any such open offer.
8. Share-based payments
During the year, no further share options were granted to employees.
9. Share capital and share premium
Issued and
Number of fully paid Share
shares up shares premium Total
US$ ‘000 US$ ‘000 US$ ‘000
At 1 January 2014 31,993,443 25,604 213,377 238,981
Issue of shares for 29,396,065 462 3,792 4,254
cash
Exercise of share 23,991,300 396 5,737 6,133
options
Exercise of warrants 1,800,000 28 314 342
Cost of share issue - - (257) (257)
At 31 December 2014 87,180,808 26,490 222,963 249,453
Issue of shares for 8,015,000 127 1,134 1,261
cash
Cost of share issue - - (60) (60)
At 31 December 2015 95,195,808 26,617 224,037 250,654
On 18 June 2015, the Company issued 6,015,000 new Ordinary Shares of
£0.01 each at a price of 10 pence per Ordinary Share, which raised
approximately US$0.94 million (£0.60 million).
On 24 June 2015, the Company issued a further 2,000,000 new Ordinary
Shares of £0.01 each at a price of 10 pence per Ordinary Share, which
raised approximately US$0.32 million (£0.20 million).
10. Dividends
No dividends were declared or paid during the year under review.
11. Reconciliation between loss and headline loss attributable to
equity holders of the Group
Headline earnings/(loss) are specific disclosures defined and required
by the Johannesburg Stock Exchange and are non-GAAP financial measures.
Group
2015 2014
US$’000 US$’000
Profit/(loss) attributable to equity
holders of the Group 1,442 (15,268)
Less: Profit on disposal of property,
plant and equipment (146) (17)
Headline earnings/(loss) 1,296 (15,285)
12. Contingent liability
Thin capitalisation
The tax legislation with regards to thin capitalisation changed with
effect from 1 April 2012 and applicable in respect of years of
assessment commencing on or after that date. The safe harbour ratio of
3:1 included in the previous legislation was replaced with the concept
of “arm’s length.” In instances where the loans are considered not to
be on an arm’s length basis all or part of the interest charged could
be disallowed as a deduction. Any interest not allowed as a deduction
will be treated as an adjustment in terms of Section 31 of the Income
Tax Act. In terms of Section 31(3) of the Income Tax Act, any adjusted
amount for transfer pricing and thin capitalisation purposes, prior to
1 January 2015, constituted a deemed loan. As per the amended law,
should this amount, plus interest deemed to have accrued on it, not
have been repaid to the taxpayer by the relevant non-resident connected
person by 31 December 2014, the outstanding “deemed loan” must “be
deemed to be a dividend consisting of a distribution of an asset in
specie, that was declared and paid by that resident to that other
person on 1 January 2015”. Such deemed dividend will be subject to
Dividends Withholding Tax (“DWT”), at a rate of 15%.
In prior years, management obtained legal opinion based on which they
concluded that there is no deemed loan. In further assessing the
impact of the amendments on its intercompany loans, management
concluded that due to the lack in industry guidance pertaining to the
application of the “arm’s length” concept, management will be unable
to confirm their conclusion without finalising a full Transfer Pricing
benchmarking study applying OECD (Organisation for Economic Co-
operation and Development) principles.
13. Events occurring after reporting date
Operating
The Company negotiated and executed a Tolling Agreement (the “Tolling
Agreement”) in 2016 with a third party supplier of ore for the
processing of gold-bearing material through the Company’s metallurgical
plant. The Tolling Agreement will enable the Company to maintain
operations with a steady and reliable feedstock whilst it continues to
pursue other growth opportunities and awaits the dewatering of the
central basin. In light of the Tolling Agreement, the Company elected
to temporarily suspend mining at its open pit operations.
The Mill 1 experienced mechanical performance issues and subsequent to
year end failed. Central Rand Gold SA has identified, purchased and is
currently installing another mill in its place. This project should be
completed in mid-July 2016.
Fundraising
In order to strengthen its balance sheet and provide working capital
in order to undertake continued surface mining operations, identify
and source further plant feed material and carry out a programme of
plant upgrades and efficiency processes to further improve plant
availability and recovery rates, the Company has subsequent to year-
end completed the following fundraising:
- A first share placement on 9 February 2016 of 14,279,371 new ordinary
shares at 3.5 pence, which raised £0.50 million.
- A second share placement on 9 March 2016 of 20,719,644 new ordinary
shares at 3.5 pence, which raised £0.73 million.
- 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 raised US$598,000, with the potential for an increase to up
to US$4,098,000 should both parties agree.
- A subscription raised US$200,000 through the subscription of
4,620,005 new ordinary shares at an issue price of 3 pence each.
- Given the continued engagement with ZGMP to optimise and potentially
expand the metallurgical plant, the Group entered a non-binding
Letter of Understanding for a share placement of up to US$4.0 million
with ZGMP with due diligence currently being undertaken.
Puno dispute
Puno lodged an application in terms of Section 344(f) and 345 of the
Companies Act against Central Rand Gold SA, which, upon advice from
the Company’s legal advisors, Central Rand Gold SA is opposing.
Answering affidavits have been lodged. The time period for Puno to file
their replying affidavit lapsed on 22 June 2016. Puno’s opportunity to
file further affidavits has now lapsed and the Company awaits Puno’s
confirmation whether they intend to persist in their application.
Issued on behalf of: Central Rand Gold Limited
Date: 30 June 2016
Date: 30/06/2016 08:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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