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CRD - Central Rand Gold Limited - Interim Management Statement

Release Date: 17/11/2009 09:00:04      Code(s): CRD
CRD - Central Rand Gold Limited - Interim Management Statement                  
Central Rand Gold Limited                                                       
("CRG" or the "Company)                                                         
(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: GG00B24HM601                                                              
Share code on LSE: CRND                                                         
Share code on JSE: CRD                                                          
INTERIM MANAGEMENT STATEMENT                                                    
-    Decline metre advancement surpasses expectations;                          
-    Main Reef intersected via decline development;                             
-    First stoping area opened for trial mining;                                
-    Gold potential exposed in middling material as evidenced in surface        
-    Metallurgical processing of oxide material has been a challenge, but       
    positive progress is now being made; and                                    
-    Puno "urgent interdict" to stop operations dismissed with costs.           
Johan du Toit, Chief Executive Officer of CRG, commented:                       
"CRG is making steady progress on a number of fronts, from the pouring of gold  
on site, improving recoveries from the metallurgical process, through to        
ramping up the underground development in advance of commercial production      
early next year. It has been a hard journey to get to where we are today, yet   
we are confident we have the business plan and the team to take CRG onto its    
next phase of development."                                                     
For further information, please contact:                                        
Central Rand Gold                                       +27 (0) 11 551 4000     
Johan du Toit / Patrick Malaza                                                  
Evolution Securities Limited                           +44 (0) 20 7071 4300     
Simon Edwards / Chris Sim / Neil Elliot                                         
Macquarie First South Advisers (Pty) Limited            +27 (0) 11 583 2000     
Thembeka Mgoduso / Annerie Britz /                                              
Melanie de Nysschen / Manisha Ramlakhan                                         
Buchanan Communications                                +44 (0) 20 7466 5000     
Bobby Morse / Ben Willey / Katharine Sutton                                     
Jenni Newman Public Relations (Pty) Limited             +27 (0) 11 506 7300     
Jenni Newman / Megann Outram                                                    
OPERATIONAL UPDATE                                                              
On 25 August 2009, the Board of Directors issued the following short to mid-    
term operational targets as part of the June 2009 interim results:              
1.   Complete the trial mining operation;                                       
2.   Prove that the Snowden Resource to Reserve Report issued in August 2009    
    ("Snowden Report") assumptions are robust and conservative in practice;     
3.   Demonstrate material production upside to the "base case";                 
4.   Confirm the potential for significant improvements in metallurgical        
5.   Utilise the knowledge gained from trial mining to identify and develop     
    additional mining targets; and                                              
6.   Prove CRG can mine assets profitably.                                      
Set out below is a progress update on the Company`s 6-Point Plan.               
1.   Complete the trial mining operation                                        
The objective of the trial mining operation is to physically validate the main  
mining and metallurgical methodology as described in the Snowden Report. The    
results of the trial mining will be used to determine the future growth         
strategy of the Company.                                                        
Surface mining                                                                  
Surface trial mining has now largely been completed at the Company`s current    
mining site. Both the Main Reef and the Main Reef Leader high grade reef zone   
were mined at an average strip ratio of 1:9 for an estimated total of 40,000t   
@ 4.4g/t Au for the quarter.  Other surface target areas have been identified   
in the Company`s current mining right area but their commercial viability will  
only be assessed once underground trial mining has been completed.              
Underground mining                                                              
As at the end of October 2009, the decline was an estimated 66m below surface   
at a lateral distance of 474m from the portal. The development rate has         
significantly improved since the introduction of Australian Contract Mining     
("ACM") who are now averaging an outstanding 52m per week compared to a rate    
of 20m per week prior to their commencement.                                    
Ground conditions have improved significantly after mining through the          
transition zone separating the shallow oxide and deeper sulphide zones. The     
initially proposed trial blocks near-to-surface were abandoned due to poor      
ground conditions. Several of the diamond drill holes identified unexpected     
voids on the Main Reef where existing mine plans and data indicated solid       
insitu blocks of ground. A comprehensive drilling programme is underway to      
systematically drill out targeted mining blocks to ensure that planned future   
blocks are free of unexpected mining voids. Drill results are appended at the   
end of this report.                                                             
The latest cross cut accessed the old Level 5 where the Main Reef Leader was    
mined out in the 1960s. The mine has now been divided into two sectors; east    
and west. Two stoping blocks have been identified for trial mining, a 58m       
stoping block on the west which has been exposed and a potential 80m stoping    
block on the east. Trial stoping remains on schedule to begin in late December  
ORE SORTING                                                                     
In the Snowden Report it was assumed that the development ore would be          
upgraded using conventional South African hand sorting. Recent tests have been  
undertaken using optical sorter technology as applied with success at the       
nearby Kloof Gold Mine. An 8kg sample of Main Reef and internal quartzite       
(waste) was tested at the certified Mintek Laboratory in Johannesburg, South    
Africa, with excellent separation results i.e. 90 per cent success in           
waste/ore separation. Encouraged by the preliminary findings, a 30t bulk        
sample will be processed through Mintek`s ore sorting pilot plant with results  
expected in December 2009. Success in using this method has the potential to    
significantly increase production and capture the majority of sweepings and     
vampings (old gold) left behind.                                                
METALLURGICAL UPDATE                                                            
Metallurgical equipment consists of crushing and concentrating                  
("concentrating") and Carbon-In-Leach ("CIL") plants.                           
The new Gekko 50tph concentrating plant was delivered to site on 16 October     
2009. The plant has been assembled and commissioning will begin once there is   
a need for additional capacity from the underground ore anticipated in 2010.    
The Bateman 30tph concentrating plant ("Bateman plant") has operated above      
design tonnage for sustained periods, however, overall availability, less than  
18 hours per day, has been compromised by sensitivity to fluctuating feed and   
consequent reliability of the vertical shaft impactor ("VSI"). A small          
investment to reliably control and maintain the feed tonnage rates is being     
engineered for implementation in early 2010.                                    
The Bateman plant has achieved in excess of 70 per cent recovery on difficult   
oxide material and this is a positive indicator of performance for when the     
plant will process true sulphide underground ore from which the recovery        
should be significantly higher.                                                 
During the current proof of concept phase and until production begins in        
earnest, the Company has decided to suspend concentrating with the              
operationally intensive Gekko 20tph plant. The Gekko 20tph plant has served     
its intended purpose as a pilot plant for metallurgical testing as well as to   
provide insight into the final design of the Gekko 50tph concentrating plant.   
Up to the end of September 2009, mainly oxide material has been treated by the  
concentrating and CIL plants. The CIL plant was commissioned at the end of      
June 2009 and started operating on a 24/7 basis in late September 2009. The     
CIL plant processed approximately 7,500t at an estimated grade of 9g/t for the  
quarter with gold production of only 193oz. In early October 2009, the Company  
engaged Mr PG Hurter an experienced metallurgist with over 20 years`            
experience with mining companies in South Africa and Australia, to lead a       
review of CRG`s current metallurgical processes and address the low recovery    
rate. Findings from his investigation include:                                  
-    An initial review indicates that there are no fundamental flaws with the   
    metallurgical plants;                                                       
-    A finding that carbonaceous material including fly ash from ash dumps now  
identified over the surface mining slots, has contaminated the oxide        
    material processed to date and blocked gold recoveries. A 0.1 per cent      
    carbon content in the feed has been tested to result in an increased        
    tailing of >1g/t. This is technically termed "Preg Robbing" and has been    
mitigated now by the addition of a carbon blocker. CIL tails are now        
    consistently between 0.25 g/t and 0.6 g/t indicating a recovery in excess   
    of 90 per cent. This unexpected "Preg Robbing" is limited to the surface    
    oxide material and will not be a factor with the underground sulphides to   
be exclusively mined in 2010; and                                           
-    A finding that previous start-up concentrator tails carrying grade up to   
    2g/t will be recovered and processed directly into the CIL -                
    approximately 40,000t with an expected recovery of 1,800oz.                 
In addition the following improvements to the metallurgical process have been   
identified and are being implemented:                                           
-    Automation of gravity recovery and additional pumping and screening to     
    prevent spillages of concentrate.                                           
-    Sampling techniques and methodology, and metal accounting procedures, to   
    better understand and manage gold recovery.                                 
CRG`s estimated stockpiles and grades as at end September 2009 are as follows:- 
-    Run of Mine ("ROM") oxidised surface material of 14,000t at 3.9g/t;        
-    ROM underground development sulphide ore of 2,000t at 5.8g/t; and          
-    Concentrate of 7,700t at 6 g/t still to be processed through the CIL.      
2.   Prove that the Snowden Report assumptions are robust and conservative in   
An update on key assumptions contained in the Snowden Report is provided in     
the table below:                                                                
                          included the                                          
Snowden Report    Progress to date                    
Gold price                 US$900            US$1129                            
Exchange rate              ZAR8.00           ZAR7.47                            
Met recovery               80 per cent       Will be tested once underground    
ore is available from stoping,      
                                            which is expected in early          
                                            2010. Seventy per cent recovery     
                                            results on difficult oxide          
material treated to date give       
                                            the Board confidence that           
                                            recovery in excess of 80 per        
                                            cent is achievable.                 
Average head grade         4.2g/t            Reef driving underway (expect      
                                            representative results in           
                                            December 2009). The Snowden         
                                            Report assumed no grade would       
occur within the middling,          
                                            resulting in a mining dilution      
                                            factor of 30 per cent. Some         
                                            areas of the quartzite              
separating the Main Reef from       
                                            the Main Reef Leader in mined       
                                            slots contained gold grades         
                                            (0.8 g/t to 3.7 g/t) over its       
width, which, if encountered in     
                                            the underground mining              
                                            operations will have important      
                                            positive implications during        
the upcoming trial mining.          
Sweepings and vamping      NIL               Sweepings and vampings have        
                                            been identified in the trial        
                                            mining area, but it is too          
early to quantify these             
Cash cost (operating cost) US$580/oz         Still too early to validate any    
                                            changes in assumptions.             
Capital costs              US$220/oz         Too early to confirm, however,     
                                            waste development is in line        
                                            with the Snowden Report.            
                                            Decline development is              
estimated at US$1,137/m. CRG is     
                                            currently achieving US$1,166/m      
                                            (excluding labour and equipment     
3.   Demonstrate material production upside to the "base case"                  
A definitive update for this objective will only be available once trial        
mining has been completed.                                                      
4.   Confirm the potential for significant improvements in metallurgical        
Trial processing of underground sulphide ore will commence in early 2010.       
5.   Utilise the knowledge gained from trial mining to identify and develop     
additional mining targets                                                       
The Dr Lemmer model is currently being reviewed to identify the next potential  
mining areas.                                                                   
6.   Prove CRG can mine assets profitably                                       
Trial mining in progress to date has not identified any significant variations  
to the original assumptions contained in the Snowden Report that would          
negatively impact the future profitability of the Company.                      
OTHER PERTINENT COMPANY MATTERS                                                 
Cash Position                                                                   
As at the end of September 2009, the Company had approximately US$22.87m on     
The breakdown of the cash spends can be analysed as follows:                    
Cash reconciliation                                  Value US$ million          
Balance as at 30 June 2009                           46.40                      
Capital expenditure                                  -9.90                      
Operational and administrative expenditure           -12.84                     
Working capital                                      -1.60                      
Foreign exchange  gain                               0.40                       
Interest                                             0.22                       
Gold sales                                           0.19                       
Balance as at 30 September 2009                      22.87                      
The cash balance at 30 October 2009 is US$19.3m. CRG is not expecting to incur  
any significant capital expenditure during the last quarter of 2009. Gold       
revenue is lower than anticipated but is expected to increase over the next     
quarter. CRG is currently pursuing various funding options for essential        
mining equipment as well as for the water pump station that will be required    
over the next few months. CRG expects to conclude these discussions by mid      
December 2009. The success of these negotiations will determine the timing and  
quantum of the next equity fundraising.                                         
Black Economic Empowerment                                                      
The arbitration procedure is continuing with Puno Gold Investments (Pty)        
Limited ("Puno"). It is expected that the arbitration proceedings will be       
completed during 2010.                                                          
In a separate matter, Puno brought an urgent interdict against Central Rand     
Gold South Africa (Pty) Limited ("CRGSA"), CRG`s operating company, to stop     
the Company from progressing on what Puno refers to as "full scale mining".     
The urgent interdict was heard on 5 November 2009 by the South Gauteng High     
Court. The Company is pleased to report that the urgent interdict sought by     
Puno to halt the Company`s trial mining operations was dismissed. In addition,  
Puno is required to pay all legal costs associated with this dispute.           
APPENDIX 1- DRILL RESULTS                                                       
Diamond drilling has continued during the reporting period, although the focus  
of the drilling has been to target areas of unmined Main Reef and delineate     
areas where mining voids occur. Previously unreported drilling results from     
the CMR area are tabulated below:                                               
Borehole                                        Grade  (corr)                   
Name         X 29      Y 29     From    To      (g/t)  (cm)    Comment          
DDCMR_03_04  -2898823  -106518  64.85   65.95   4.52   110     Cavity on        
Main Reef         
DDCMR_07_04  -2898898  -106443  78.46   81.48   2.76   302     Cavity on        
Main Reef         
DDCMR_55_00  -2899236  -105360  140     Dyke                   Terminated       
in Dyke           
DDCMR_80005  -2899095  -105930  35.67   38.3    7.44   208     Single Reef/     
                                                              Value Zone        
DDCMR_80006  -2899098  -105951  46.73   49.2    1.9    195     Incomplete       
Core at Main      
                                                              Single Value      
DDCMR_80007  -2899079  -106018  19      Aband                  Hole             
DDCMR_80008  -2899099  -106034  68.68   69.95                  Cavity at        
Main Reef         
                                                              and Main          
                                                              Reef Leader       
DDCMR_80009  -2899093  -106031  67.31   69.81   8.04   198     Cavity on        
                                                              Main Reef         
DDCMR_80010  -2899084  -106025  61.81   62.49                  Cavity at        
                                                              Main Reef         
                                                              and Main          
                                                              Reef Leader       
DDCMR_80011  -2899095  -106056  76.43   76.95                  Cavity at        
                                                              Main Reef         
                                                              and Main          
Reef Leader       
DDCMR_90001  -2898777  -106635  80.1    80.91                  Single reef/     
                                                              Value Zone        
DDCMR_90002  -2898826  -106583  104.76  106.34                 Single reef/     
                                                              Value Zone        
DDCMR_90003  -2898716  -106691  66.04   67.45                  Cavity at        
                                                              Main reef         
                                                              and Main          
DDCMR_90003b -2898716  -106691  74.71   75.2    8.67   39      Cavity on        
                                                              Main Reef         
DDCMR_90004  -2898708  -106757  83.88   84.67   0.74   79      Cavity on        
                                                              Main Reef         
DDCMR_90004b -2898708  -106757  94.86   97.57                  Single reef/     
                                                              Value Zone        
DDCMR_90005  -2898637  -        89.55   89.68                  Cavity at        
                      1066859                                 Main Reef         
                                                              and Main          
                                                              Reef Leader       
DDCMR_90005b -2898637  -106859  101.96  104.05                 Single Reef/     
                                                              Value Zone        
DDCMR_90006  -2898627  -106906  81.21   82.95   8.42   174     Single Reef/     
                                                              Value Zone        
DDCMR_90006b -2898627  -106906  79.18   80.45                  Single Reef/     
                                                              Value Zone        
DDCMR_90007  -2898605  -106967  85.3    87.06   5.81   176     Single Reef/     
                                                              Value Zone        
DDCMR_90007b -2898605  -106967  104.51  106.17                 Single Reef/     
Value Zone        
DDCMR_90008  -2898559  -107014  80.41   82.02                  Cavity at        
                                                              Main Reef         
and Main          
DDCMR_90008b -2898559  -107014  96.57   98.21   1.87   130     Single Reef/     
Value Zone        
17 November 2009                                                                
Macquarie First South Advisers (Pty) Ltd                                        
Date: 17/11/2009 09:00:03 Supplied by www.sharenet.co.za                     
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