CRD - Central Rand Gold Limited - 2010 Interim Report Release Date: 17/08/2010 08:00:06 Code(s): CRD CRD - Central Rand Gold Limited - 2010 Interim Report
Central Rand Gold Limited
("CRG" or the "Company" or the "Group")
(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: GG00B24HM601
Share code on LSE: CRND
Share code on JSE: CRD
2010 INTERIM REPORT
Central Rand Gold, the South African gold mining and exploration holding
company, today announces its Interim Results for the six months ended 30 June
2010. The full set of results is available on the Company`s website:
www.centralrandgold.com
For further information, please contact:
CRG +27 (0) 11 674 2304
Johan du Toit / Patrick Malaza
Evolution Securities Limited +44 (0) 20 7071 4300
Simon Edwards / Chris Sim / Neil Elliot
Macquarie First South Advisers (Pty) Ltd +27 (0) 11 583 2000
Annerie Britz/Melanie de Nysschen/ Manisha Ramlakhan
Buchanan Communications +44 (0) 20 7466 5000
Bobby Morse / James Strong / Katharine Sutton
Jenni Newman Public Relations (Pty) Ltd +27 (0) 11 506 7350
Jenni Newman
CHIEF EXECUTIVE OFFICER`S REVIEW
Although the first half of 2010 was a challenging period for CRG, we have made
significant strides forward, moving from trial mining to our goal of building a
platform for a sustainable and profitable gold mine. Highlights for the Company
during this period included:
- Trial mining phase completed;
- Successful fundraising initiative to enable the Company to advance the project
to commence sustainable gold production;
- Order placed for submersible pumps and discussions progressing with government
regarding the rising water table solution;
- Underground development progressing well - decline development at 158 metres
below surface; reef development on three levels;
- Second Jumbo DD420 double boom drill rig delivered;
- Improvement in performance and recoveries from metallurgical plants;
- Optical ore sorter ordered for expected delivery in January 2011; and
- Progress in cost containment
During the first half of 2010, the Company produced a total of 3,368 ounces of
gold. The Company`s cash position at 30 June 2010 was US$4.0 million, with a
cash position, following the fundraising, of US$36.4 million as at 31 July 2010.
FUNDRAISING
After completing a US$6.0 million "Cashbox" placing on 22 January 2010 to enable
trial mining to be completed, CRG successfully raised US$35.0 million through a
"Firm Placing, Placing and Open Offer" on 5 July 2010 which was fully
underwritten by Evolution Securities (together the "Fundraising"). These funds
will provide the essential capital needed to finance the next stage of mining
progression which will include reef development and the acquisition of further
necessary mining equipment.
OPERATIONAL UPDATE
Trial Mining
The objectives of trial mining were to validate the mining method and provide
real physical and financial data for input into the mine design.
The trial mining, and subsequently updated Competent Person Report ("CPR") by
Snowden Mining Industry Consultants, corroborated an updated mine plan which is
expected to produce 476,190 ounces of gold over a mine life of 12 years with an
average operational cash (including water pumping costs) and capital costs of
US$582/oz and US$173/oz respectively from CMR West, one of the Company`s
tenement areas. Extensions of mineralised reef zones (partings), sweepings and
vampings and remnant reef pillars have also been identified as other readily
available potential sources of gold but have not been incorporated in this mine
plan.
Mining
With the completion of trial mining, the focus now shifts to developing the
underground infrastructure to ensure that sustainable production can commence.
The first half of the year has been focussed on decline development to provide
the operations with sufficient access for reef development whilst opening early
cash flow opportunities on identified surface materials. Total development
advance to date is sitting at 1,256.1 metres with 38,497 tons of underground ore
and 45,664 tons of surface material.
Key mining statistics Metres Tonnes Fully diluted
development grams per tonne
("g/t")
Decline and waste development 1,014.3 N/A N/A
Reef development 241.8 32,424 1.6
Trial mining stoping - 6,073 2.6
Surface - 45,664 2.9
Total mining production 1,256.1 84,161 -
The decline development has reached 158 metres below surface. Reef development
has commenced on three levels, with the first level at 121mbs. Ground conditions
experienced to date, have been variable for the reef development, which has
required additional hanging wall support being introduced. The management team
is considering various optimisation opportunities, with the potential for
greater efficiencies and effectiveness that will complement the current mining
methodology.
A second Jumbo DD420 double boom drill rig was delivered to site at the end of
July 2010. This is expected to further increase monthly development rates.
Geology
During March 2010, the Probable Ore Reserve was upgraded to 3.73 million tonnes
with an average grade of 4.0 grams per tonne, yielding 482,000 ounces of gold.
Further Confirmation of Resource Model
Channel sampling of underground development ore undertaken to date has fully
supported the Australian Joint Ore Reserves Committee ("JORC")/South African
Code for Reporting of Exploration Results, Mineral Resources and Mineral
Reserves ("SAMREC") Indicated Resource, as previously defined and reported. The
in-situ grade, grade above cut-off and overall block payability (i.e. the
percentage of the block above cut-off) appears to be very predictable and
robust. However, the specific high grade locations within the block are more
variable. A comparison of average block characteristics is presented in the
table below.
Theoretical Actual
Develop Block In- C-O Pay Ave Ave In- C-O Pay Ave Ave
ment situ (g/t) % Width (g/t) situ (g/t) % Width (g/t)
(g/t) (cm) (g/t) (cm)
1596 CMR 3.04 3 46% 151 4.67 3.81 3 35% 100 9.18
46
1581 CMR 3.55 3 50% 112 5.29 8.80 3 80% 100 10.58
33
1580 CMR 3.55 3 50% 112 5.29 0.83 3 0% 100 0.83
33
1575 CMR 3.55 3 50% 112 5.29 4.53 3 62% 100 6.21
33
1563 CMR 3.55 3 50% 112 5.29 4.39 3 72% 111 5.36
33
1551 CMR 3.55 3 50% 112 5.29 5.77 3 100% 101 5.77
33
Averages 3.43 3 49% 122 5.14 4.26 3 51% 102 6.26
CMG/T 416 - - - 624 436 - - - 642
G/t over 122 cm 3.43 - - - 5.14 3.59 - - - 5.28
In particular, the gold accumulation (cmg/t) and equivalent gold grade over a
standardised width of 122cm for the sampled development, closely approximates
that described by the Theoretical Model.
Surface Exploration Target*
Exploration trenching has continued to the east and west of the process plant.
Two additional potential new open pit mining areas have been delineated which
offer the opportunity to generate further gold production from surface areas:
Note 1:
* 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. 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.
The information in this statement relating to Mineral Resources and geology has
been reviewed and approved by Mr Keith Matier, BSc (Hons), GDE,Pr Sci Nat, who
is a competent person in terms of the SAMREC and JORC codes. Mr Matier is
Geology Manager of Central Rand Gold South Africa (Pty) Limited and has over 17
years experience in exploration, mineral resource management and mineral
evaluation
DS Open Pit Block
To the east of the plant, trenching has exposed approximately 80m of in-situ
Main Reef Leader, Main Reef and Mineralised Middling. Material exposed can be
extracted through free digging and is open at depth. Combined assay results for
material exposed thus far are as follows:
Main Reef Leader: 6.4 g/t over 58cm;
Middling: 2.2g/t over 47cm;
Main Reef: 3.6g/t over 70cm; and
Total Package: 4.2g/t over 175cm.
An estimated exploration target of between 22,000 tonnes and 28,000 tonnes has
been discovered in these areas with composite grades of between 3.3g/t and
3.8g/t.
KF Open Pit Block
To the west of the process plant, exploration trenching has exposed
approximately 160m of Main Reef package. The material exposed is amenable to
free digging, although between 3m and 5m of overburden and backfill is present.
The Main Reef averages approximately 7.1g/t over a diluted 102cm width with
occasional Main Reef Leader remnant pillars present, grading up to 290g/t.
An estimated exploration target of between 27,000 tonnes and 55,000 tonnes has
been discovered in this area with composite grades of between 7.1g/t and 7.5g/t.
Metallurgy
The Bateman concentrator has processed 37,851 tonnes with 21.4% mass pull factor
producing 8 108 tonnes of concentrate at 3.5 g/t for the six months to 30 June
2010. A higher-than-expected flotation recovery of 75% on low grade at 1.4 g/t,
predominantly oxide material was achieved despite lower than planned
availability at 59%.
Direct feed to the carbon-in-pulp ("CIP") for the period was 33,120 tonnes at
3.2g/t. A total of 41,228 tonnes, including the Bateman concentrate, have been
processed through the CIP for the six months ended 30 June 2010, with year to
date availability at 87%, 2% above forecast with an acceptable recovery of
approximately 89% on oxide material.
In total 70,971 ROM tonnes were fed to both Bateman and CIP plant during the
period to end June 2010.
Following the improvements that have been made to the metallurgical plants
earlier in the year, the emphasis has shifted to maximising throughput and
recoveries, and establishing accurate metal accounting to enable refinement of
all metallurgical processes.
Water Table
Good progress has been made regarding the rising water-table that affects the
Company`s mining operations. If this water, also known as acid mine drainage
("AMD"), is allowed to decant onto the surface, it will have serious
environmental and ultimately economic implications for the Gauteng area. Due to
the seriousness of this problem, discussions have been escalated to the highest
level of government. In broad terms, there is an understanding between all
stakeholders, on an interim solution, which will include the construction of a
submersible pump station, at 400mbs, the refurbishment of the existing high
density sludge plant and the construction of a pipeline connecting the Western
and Central basins. The Minister of the South African Department of Water
Affairs, Minister Buyelwa Sonjica, speaking at the Agri SA water conference in
Johannesburg on 11 August 2010, confirmed that the South African government
recognised that as 70% of the mining area in the Witwatersrand district is
currently ownerless and the liability to resolve the AMD problem would reside
with the State, requiring a contribution of approximately US$19.8 million
(ZAR145.0 million). The remaining 30% liability would be funded by existing
active mining operations in the area.
To limit the extent that the water table will rise above the 400mbs level, the
Company has placed an order for the submersible pumps, which are the project`s
longest lead item. The initial payment of US$1.3 million (ZAR10 million) will
form part of CRG`s total committed contribution of US$5.0 million (ZAR36.0
million).
Corporate Overhead
Cost containment continues to be a key focus for the Company. As part of this
process, a total of 46 support staff accepted redundancy packages, reducing the
support payroll costs by 28%. With effect from the beginning of July 2010, the
head office building in Killarney was vacated, with all functions moving to the
existing operational offices at Rand Leases, Roodepoort, which will result in
significant savings going forward.
Management and Directorate
Don Harper resigned as CRG`s Head of Mining at the end of June 2010, due to
family reasons, but will still be available to the Company in a consultancy
capacity until the end of September 2010. The Group`s thanks goes to him for his
valuable contribution towards reconfiguring and refocusing CRG`s mining
operations. A recruitment process is at an advanced stage to find a replacement.
In the interim, John Ramabaleha is acting as the Head of Mining, with the
continuing support of the mining contractors, Australian Contract Mining
("ACM").
In February 2010, Patrick Malaza and Jerome Brauns were appointed to the Board
of Directors (the "Board") as Finance Director and Non-Executive Director,
respectively.
In April 2010 the following changes were made to the Board:
- Michael McMahon succeeded Alastair Walton as the CRG Chairman; and
- Robert Kirby resigned as a Non-Executive Director.
BLACK ECONOMIC EMPOWERMENT
Funding Call and Call Option: Arbitration
Puno Gold Investments (Proprietary) Limited ("Puno"), the 26% shareholder in
Central Rand Gold SA, has failed to institute the arbitration proceedings
envisaged by an Order of the South Gauteng High Court in May 2009, in order to
resolve the dispute surrounding the minority shareholder`s funding obligations
and the validity of the Company`s call option in respect of their shares as a
consequence. Attempts to resolve the dispute amicably have been explored to no
avail. In the circumstances, the Company is now taking steps to ensure that the
arbitration proceedings be heard as soon as possible and has itself taken steps
in order to have an arbitrator appointed.
Damages Claim
Puno has issued a summons on the Company, claiming damages to the value of US$17
million. This action, instituted by Puno against the Company out of the South
Gauteng High Court, Johannesburg, traverses issues similar to those covered by
Puno`s previous application. In particular, Puno`s damages claim is premised on
a similar interpretation of the Shareholders` Agreement as it contended for in
the previous application.
The previous application was dismissed by Acting Judge, Alan Horwitz SC, on
Thursday, 5 November 2009, with costs, including the costs of two counsel on the
grounds that Puno had failed to make out a case for the relief sought on each
ground which formed the subject of the application hearing. Puno`s application
for leave to appeal against the judgment was also dismissed with a similar order
as to costs. In relation to Puno`s interpretation of the Shareholders`
Agreement, the Acting Judge expressly rejected the interpretation on which the
present action seeks to rely.
It is the Company`s considered view that the present action is equally ill-
founded, and possibly vexatious, and while Puno has in any event failed to take
proper and appropriate steps in the institution of these proceedings on which
basis alone the present action must be stayed, Puno`s contentions for the relief
sought are considered to be flawed and devoid of merit.
In consequence, the Directors are of the opinion that in as much as the action
has no prospects of success, this will not have any material consequences in
respect of the consolidated accounts of the Group.
FINANCIAL REVIEW
Operating loss for the period decreased by 22% to US$17.4 million (30 June 2009:
US$22.4 million). This is mainly attributed to:
- Revenue from the sale of 3,085 ounces of gold processed from initial
underground development ore, trial stoping and shallow surface materials;
- Processing plant shutdown and consequent repair and reconfiguration costs;
- Provision for voluntary retrenchment of 46 head office and support staff;
- Full half year depreciation and amortisation of mine assets; and
- Impairment of redundant processing plant.
Net loss for the period increased 19% to US$17.3 million (30 June 2009: US$14.6
million) mainly attributed to lower interest received and lower foreign exchange
gains on the back of lower cash balances.
The net cash position is reported at approximately US$4.0 million (30 June 2009:
US$46.4 million). The Company`s cash position, following the Fundraising, is
$36.4 million as at 31 July 2010. Major cash flows during the period are set out
in the abridged cash flow statement below:
US$`million
Cash and cash equivalents at 1 January 2010 15.9
Cash used in operations (13.7)
Interest received 0.3
Mine property, plant and equipment (7.8)
Security deposits - Redemption 0.5
Proceeds from share issue 6.0
Effects of exchange rate movement on cash balances 2.8
Cash and cash equivalents at 30 June 2010 4.0
OUTLOOK
With trial mining now completed, the Group is committed to achieving the
implementation of sustainable and profitable gold mining operations.
The second half of 2010 will focus mainly on establishing CRG`s underground
mining operations, having made good progress in the first half, with 1,256
metres of development completed. The Company will continue to seek to optimise
its mining methodology thereby improving the speed that it can access mineable
reef when poor ground conditions are encountered.
As outlined at the time of the Fundraising in June 2010, the Company will also
focus on securing its mining fleet. The global increase in the demand for mining
equipment has resulted in delivery lead times increasing substantially over the
last six months. The successful Fundraising has enabled the Company to have
meaningful discussions with various equipment suppliers in an attempt to secure
essential underground mining equipment. Until the Fundraising was completed it
was not possible to contract for the additional equipment, the most significant
being a Long Hole Rig, which is required to commence underground stoping. Any
delay in delivery could have short term production implications as the 2010
production forecast predominantly relies on the processing of higher grade
underground ore. In order to mitigate these effects, extended surface
exploration and surface mining have been undertaken to ensure the optimal
utilisation of metallurgical plants. The Company will continue with its
underground mine development programme, establishing stoping blocks, while it
awaits confirmation of delivery of the Long Hole Rig.
From a metallurgy point of view, the emphasis will be on successfully
implementing the optical ore sorter, which is expected to be delivered in
January 2011. We have retained the option to rent an ore sorter in the interim,
should underground production ramp up prior to delivery of the new unit. The ore
sorter will provide an effective mechanism to remove waste from underground ore
linked to the mining method being utilised. It will also deal with dilution and
provide an efficient way of "high grading" material so that recoveries can be
maximised.
Another important emphasis will be the completion of the feasibility study by
early 2011 relating to CMR East, which is the Company`s next development target.
During the first half of 2010, the Company produced a total of 3,368 refined
ounces of gold, in line with management expectations. The second half of 2010
promises to be an exciting period for CRG, as it will build on the trial mining
experience and create a platform for strong development and production progress
to be made in the years that lie ahead.
Johan du Toit
CONDENSED GROUP INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 201
0
Notes 30 June 2010 31 December 30 June 2009
US$ `000 2009 US$ `000
(Unaudited) US$ `000 (Unaudited)
(Audited)
Employee benefits expense (5,546) (9,688) (5,027)
Directors` emoluments 12 (534) (1,676) (925)
Depreciation and (1,445) (2,479) (911)
amortisation
Inventory write down (420) (1,947) (1,076)
Operating lease expense (310) (833) (689)
Exploration and 13 (5,249) (33,696) (11,061)
evaluation expenditure
Other expenses (3,873) (5,956) (2,680)
Operating loss (17,377) (56,275) (22,369)
Interest receivable 772 3,996 2,458
Finance costs (500) (1,108) (329)
Foreign exchange 367 7,596 6,085
transaction gains
Other income and gains 6 2 -
Loss before income tax (16,732) (45,789) (14,155)
Income tax expense 14 (617) (546) (399)
Loss for the period (17,349) (46,335) (14,554)
Loss is attributable to:
Non-controlling interest - - -
Equity holders of the (17,349) (46,335) (14,554)
parent
(17,349) (46,335) (14,554)
Shares in issue 271,611,610 246,919,650
246,919,650
Weighted average number 268,746,797 246,919,650
of ordinary shares in 246,919,650
issue
Fully diluted weighted 268,746,797 246,919,650
average number of 246,919,650
ordinary shares in issue
Basic loss per share (6.46) (18.77) (5.89)
(cents)
Headline loss per share (5.46) (17.15) (5.62)
(cents)
Diluted loss per share (6.46) (18.77) (5.89)
(cents)
Diluted headline loss per (5.46) (17.15) (5.62)
share (cents
Reconciliation between
loss attributable to the
equity holders of the
Group and the headline
loss attributable to the
equity holders of the
Group:
Loss attributable to (17,349) (46,335) (14,554)
equity holders of the
Group
Provision for 616 - 472
restructuring
Loss on measurement of 2,159 3,496 -
non-current assets held
for sale to fair value,
less costs to sell
(Profit)/loss on disposal (98) 501 217
of property, plant and
equipment
Headline loss (14,672) (42,338) (13,865)
attributable to equity
holders of the Group
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED
30 JUNE 2010
30 June 2010 31 December 2009 30 June 2009
US$ `000 US$ `000 US$ `000
(Unaudited) (Audited) (Unaudited)
Loss for the period (17,349) (46,335) (14,554)
Other comprehensive
income:
Exchange differences on (3,245) 14,500 12,610
translating foreign
operations
Income tax relating to - - -
components of other
comprehensive income
Other comprehensive income (3,245) 14,500 12,610
for the period, net of tax
Total comprehensive income (20,594) (31,835) (1,944)
for the period
Total comprehensive income
is attributable to:
Non-controlling interest - - -
Equity holders of the (20,594) (31,835) (1,944)
parent
(20,594) (31,835) (1,944)
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010
Note 30 June 2010, 31 December 30 June 2009
US$ `000 2009 US$ `000
(Unaudited) US$ `000 (Unaudited)
(Audited)
ASSETS
NON CURRENT ASSETS
Property, plant and 5 31,339 34,298 30,712
equipment
Intangible assets 7 1,282 1,316 1,251
Security deposits and 5,641 5,806 -
guarantees
Loans receivable 8 8,065 7,818 6,626
46,327 49,238 38,589
CURRENT ASSETS
Security deposits and 185 510 6,686
guarantees
Prepayments and other 4,446 5,272 5,176
receivables
Inventory 9 1,205 1,574 4,142
Cash and cash 3,945 15,899 46,449
equivalents
Non-current assets held 6 8,780 2,750 -
for sale
18,561 26,005 62,453
TOTAL ASSETS 64,888 75,243 101,042
EQUITY AND LIABILITIES
Attributable to equity
holders of the parent
Share capital 10 5,424 5,023 5,023
Share premium 10 197,017 191,406 191,406
Share-based 28,296 27,482 26,644
compensation reserve
Treasury shares (6) (2) (2)
Foreign currency (31,645) (28,400) (30,290)
translation reserve
Accumulated losses (156,174) (138,825) (106,859)
42,912 56,684 85,922
Non-controlling - - -
interest
TOTAL EQUITY 42,912 56,684 85,922
NON CURRENT LIABILITIES
Environmental 11 1,460 1,434 39
rehabilitation and
other provisions
Loan payable 8,065 7,818 6,626
Operating lease - 26 41
liability
Borrowings 1 12 35
9,526 9,290 6,741
CURRENT LIABILITIES
Trade and other 8,155 7,620 6,413
payables
Environmental 11 2,805 701 1,206
rehabilitation and
other provisions
Taxation payable 1,461 895 709
Operating lease 4 26 13
liability
Borrowings 25 27 38
12,450 9,269 8,379
TOTAL LIABILITES 21,976 18,559 15,120
TOTAL EQUITY AND 64,888 75,243 101,042
LIABILITIES
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE
2010
Attributable to equity holders of the Parent Company
Notes Ordinary Share Share-based Treasury
share premium compensation Shares
capital reserve
US$ `000 US$ `000 US$ `000 US$ `000
Balance at 31 5,023 191,406 26,429 (4)
December 2008
Total
comprehensive
income for the
period ended 30
June 2009
Loss for the - - - -
period
Other
comprehensive
income
Foreign currency - - - -
adjustments
Transactions with
owners, recorded
directly in equity
Employee Share
Option Scheme:
Transfer of - - (185) -
forfeited share
options
Share-based - - 400 2
payments:
Employees` and
Directors` shares
Balance at 30 June 5,023 191,406 26,644 (2)
2009
Balance at 31 5,023 191,406 27,482 (2)
December 2009
Total
comprehensive
income for the
period ended 30
June 2010
Loss for the - - - -
period
Other
comprehensive
income
Foreign currency - - - -
adjustments
Transactions with
owners, recorded
directly in equity
Issue of Shares:
Capital raising 10 401 5,611 - -
Employee Share
Option Scheme:
Share-based 17 - - 814 (4)
payments:
Employees` and
Directors` shares
Balance at 30 June 5,424 197,017 28,296 (6)
2010
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2010
(CONTINUED)
Attributable to equity holders of the Parent Company
Notes Foreign Accumulated Total Non Attributable
currency losses controlling to equity
translation interest holders of
reserve the Parent
Company
US$ `000 US$ `000
Balance at 31 (42,900) (92,490) 87,464 - 87,464
December 2008
Total
comprehensive
income for
the period
ended 30 June
2009
Loss for the - (14,554) - (14,554)
period (14,554)
Other
comprehensive
income
Foreign 12,610 - 12,610 - 12,610
currency
adjustments
Transactions
with owners,
recorded
directly in
equity
Employee
Share Option
Scheme:
Transfer of - 185 - - -
forfeited
share options
Share-based - - 402 - 402
payments:
Employees`
and
Directors`
shares
Balance at 30 (30,290) (106,859) 85,922 - 85,922
June 2009
Balance at 31 (28,400) (138,825) 56,684 - 56,684
December 2009
Total
comprehensive
income for
the period
ended 30 June
2010
Loss for the - (17,349) (17,349) - (17,349)
period
Other
comprehensive
income
Foreign (3,245) - (3,245) - (3,245)
currency
adjustments
Transactions
with owners,
recorded
directly in
equity
Issue of
Shares:
Capital 10 - - 6,012 6,012
raising
Employee
Share Option
Scheme:
Share-based 17 - - 810 - 810
payments:
Employees`
and
Directors`
shares
Balance at 30 (31,645) (156,174) 42,912 - 42,912
June 2010
CONDENSED GROUP CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2010
Note 30 June 2010, 31 December 30 June 2009
US$ `000 2009 US$ `000
(Unaudited) US$ `000 (Unaudited)
(Audited)
CASH FLOWS FROM (16,732) (45,789) (14,155)
OPERATING ACTIVITIES
Loss before tax
Adjusted for : 1,445 2,479 911
Depreciation and 265 1,053 638
amortisation
Employment benefit (98) 501 217
expenditure (share-
based payments)
Loss/(profit) on 420 1,947 -
disposal and scrapping
of assets
Inventory write down 2,202 4,476 -
Impairment of assets (367) (7,596) (6,085)
Net gain on foreign (48) 9 3
exchange
Increase/(decrease) in (6) (2) -
operating lease
liability
Sundry income (772) (3,996) (2,458)
Interest received 500 1,108 329
Finance costs
Changes in working (826) 60 2,266
capital
(Increase)/decrease in (2,185) (842) (2,813)
prepayments and other
receivables
Increase in inventory 535 3,862 1,303
Increase/(decrease) in 1,963 13 485
trade and other
payables
Increase in provisions (13,704) (42,717) (19,359)
Cash flows used in 283 2,899 2,458
operations
Interest received (12) (83) (329)
Finance costs 6 2 -
Sundry income (13,427) (39,899) (17,230)
Net cash used in
operating activities
CASH FLOWS FROM 5 (8,263) (26,915) (18,193)
INVESTING ACTIVITIES
Purchases of property, 445 104 -
plant and equipment
Proceeds from disposal 7 - (1,185) -
of property, plant and
equipment
Purchases of intangible - - (917)
assets
Purchases of (7,818) (27,996) (19,110)
subsidiaries
Net cash used in
investing activities
CASH FLOWS FROM (13) (36) (15)
FINANCING ACTIVITIES
Repayments of 490 (221) 516
borrowings
(Increase)/decrease in 10 5,985 - -
security deposits and
guarantees
Proceeds from issuance 6,462 (257) 501
of shares
Net cash (used in)/from
financing activities
(14,783) (68,152) (35,839)
Net decrease in cash 15,899 69,601 69,601
and cash equivalents
Cash and cash 2,829 14,450 12,687
equivalents at
beginning of period
Effects of exchange 3,945 15,899 46,449
rate movement on cash
balances
NOTES TO THE CONDENSED INTERIM GROUP FINANCIAL STATEMENTS
1. Basis of preparation
These condensed consolidated interim financial statements for the six months
ended 30 June 2010 have been prepared in accordance with the accounting policies
set out in the 2009 Annual Report (except as stated below) which comply with
International Financial Reporting Standards ("IFRS"), as adopted by the European
Union ("EU") in accordance with EU laws (IA`s regulation EC 1606/2002), and also
in accordance with IAS 34, `Interim Financial Reporting` as adopted by the EU.
The interim results for the six months ended 30 June 2010 are unaudited. They do
not include all of the information required for full annual financial statements
and should be read in conjunction with the consolidated financial statements of
the Group as at and for the year ended 31 December 2009, which have been
prepared in accordance with IFRS as adopted by the EU. The financial information
set out in this document in respect of the year ended 31 December 2009 does not
constitute the Group`s statutory accounts for the year ended 31 December 2009.
2. Accounting policies
Except as described below, the accounting policies applied by the Group in these
condensed consolidated interim financial statements are the same as those
applied by the Group in its consolidated financial statements as at and for the
year ended 31 December 2009, as described in those consolidated financial
statements.
Taxes on income in the interim periods are accrued using the tax rate that would
be applicable to expected total annual earnings
The following new standards and amendments to standards are mandatory for the
first time for the financial year beginning 1 January 2010:
- IFRS 5, `Non-current Assets Held for Sale and Discontinued Operations`. The
amendment clarifies that the disclosure requirements in Standards other than
IFRS 5 do not generally apply to non-current assets classified as held for sale
and discontinued operations.
- IFRS 8, `Operating Segments`. The improvement to IFRS 8 clarifies that segment
information with respect to total assets is required only if such information is
regularly reported to the chief operating decision maker
- IAS 7, `Statement of Cash Flows`. The amendment clarifies that only
expenditures that result in the recognition of an asset can be classified as a
cash flow from investing activities.
- IAS 32, `Financial Instruments: Presentation`. The amendment deals with the
classification of rights issues. For rights issues offered for a fixed amount of
foreign currency current practice appears to require such issues to be accounted
for as derivative liabilities. The amendment states that if such rights are
issued pro rata to an entity`s all existing shareholders in the same class for a
fixed amount of currency, they should be classified as equity regardless of the
currency in which the exercise price is denominated.
The following new standards and amendments to standards and interpretations have
been issued, but are not effective for the financial year beginning 1 January
2010 and have not been early adopted:
- IFRS 7, `Financial Instruments: Disclosures`
- IFRS 9, `Financial Instruments`
- IAS 1, `Presentation of Financial Statements`
- IAS 24, `Related Party Disclosures`
- IAS 27, `Consolidated and Separate Financial Statements`
- IAS 34, `Interim Financial Reporting`
3. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
During the six months ended 30 June 2010 management reassessed its estimates in
respect of:
- the carrying value of property, plant and equipment
- the units of production depreciation
- the impairment of assets
- net realisable value of non-current assets held for sale
- the recoverable amount of inventory (see note 9)
- provisions (see note 11)
4. Financial risk management
The Group`s financial risk management objectives and policies are consistent
with those disclosed in the consolidated annual financial statements as at and
for the year ended 31 December 2009
Foreign currency rates
The US Dollar rates of exchange applicable to the year are as follows:
2010 2009 2009
Six months to Year ended 31 Six months to
30 June December 30 June
Closing Closing Closing
Average Average Average
South African Rand 0.13 0.13 0.13 0.12 0.13 0.11
British Pound 1.51 1.53 1.59 1.57 1.65 1.49
5. Property, plant and equipment
During the six months ended 30 June 2010 the Group spent US$215,820 (six months
ended 30 June 2009: US$0) to upgrade processing plants and US$7,151,601 (six
months ended 30 June 2009: US$0) was spent on mine development. US$895,255 was
spent on other items of property, plant and equipment.
A Gekko 50 ton per hour processing plant was transferred to non-current assets
classified as held for sale at 30 June 2010. Refer to note 6 for further
details.
6. Non-current assets held for sale
At 31 December 2009, the Group classified land situated at holding 59,
Tedderfield Agricultural Holdings (net realisable value: US$442,125) and the
Gekko 20 ton per hour gold processing plant and head gears (net realisable
value: US$2,245,450) as non-current assets held for sale. During the period,
the Group disposed of the land for US$445,137, resulting in a loss of US$9,881.
An item of plant and machinery, a Gekko 50 ton per hour processing plant, has
been classified as held for sale during the six months ended 30 June 2010. The
value of the asset is now expected to be realised from the sale of the asset
rather than the continuing use. The value of assets transferred to non-current
assets held for sale is US$8,868,702 at 30 June 2010. Based on management`s
estimate of the fair value to be obtained from the sale, the asset held for sale
has been impaired by US$2,203,702 to its fair value less costs to sell.
7. Intangible assets
During the prior year, the Group purchased the issued share capital of Ferreira
Estate and Investment Company ("FEIC"), the registered holder of the Prospecting
and Mining rights over the Consolidated Main Reef, Crown Mines, City Deep and
Langlaagte mining areas. The amount of US$1,282,417 included the purchase of
these Prospecting and Mining rights. No further additions were made in the
current year
8. Loans receivable
Puno Gold Investments (Proprietary) Limited ("Puno")
Since the last report for the year ended 31 December 2009 there has been no
resolution to the dispute relating to alleged procedural breaches of the
Shareholders` Agreement between CRGSA and its current Black Economic Empowerment
("BEE") shareholder, Puno. The dispute surrounds the allocation of intercompany
loans which fund the budget and work programme and the incurring of, and level
of, certain costs. In order to suspend protracted litigation, the parties have
agreed to refer the matter to arbitration pursuant to the dispute resolution
mechanism under the Shareholders` Agreement. The Group still believes that
ultimately their position will prevail. The Directors are still of the opinion
that this will not have any material consequences in respect of the consolidated
accounts of the Group. Notwithstanding this position, the Group have, pending
the outcome of any dispute, allocated 100% of the intercompany balances directly
from the Company to CRGSA. This additional 26% of intercompany debt, excluding
interest, amounts to US$2,982,708 (ZAR22,375,901) between 1 January and 30 June
2010 (US$18,315,012 (ZAR151,903,560) between 1 January and 31 December 2009.
The loan payable to Puno contains the same allocations referred to above.
9. Inventory
Group
June December
2010 2009
US$ `000 US$ `000
Exploration consumables 1,045 1,223
Ore stockpiles 158 308
Stationery on hand 2 43
Total inventory 1,205 1,574
The amount of the write-down of ore stockpiles to net realisable value and
recognised as an expense is US$419,995 (2009: US$1,946,955).
10. Share capital and share premium
On 22 January 2010, CRG placed a total of 24,691,960 new ordinary shares of
GBP0.01 each in the capital of the Company at a price of GBP0.15 per share to
raise US$6.0 million (GBP3.7 million). 23,781,964 Placing Shares were placed
using the cashbox structure with existing investors and 909,996 Placing Shares
were placed with Directors and senior management of the Company. As part of this
placing, 2,567,964 ordinary shares were placed with entities owned and
controlled by Mark Creasy who is deemed to be a Related Party under the UKLA`s
Listing Rules by virtue of the fact that he is a Substantial Shareholder. The
placing of ordinary shares is classified as a smaller related party transaction
under Listing Rule 11.1.10 and this disclosure is being made in accordance with
that rule.
11. Environmental rehabilitation and other provisions
Provisions consist of provisions for environmental rehabilitation of
US$3,660,430 (30 June 2009: US$697,888) and a provision of US$605,090 (30 June
2009: US$547,562) which has been recognised for restructuring. The restructuring
costs are expected to be incurred during the current financial year.
12. Directors` emoluments
During the current year, the composition of the Board of Directors changed. Two
Directors of the Group, Mr A. Walton and Mr R. Kirkby, resigned on 14 April
2010. Mr P. Malaza and Mr J. Brauns were appointed to the Board on the 17
February 2010.
13. Exploration expenditure
Included in exploration expenditure above is the revenue incidental to the
exploration and development operations of the Group. CRGSA sold 3,085 ounces (30
June 2009: 122.81 ounces) of gold recovered from the metallurgical processing
plants during the six months ended 30 June 2010. The revenue attributable to
this sale is US$3,830,252 (30 June 2009: US$115,345)
14. Income taxes
Income tax expense is recognised based on management`s best estimate of the
weighted average annual income tax rate expected for the full financial year.
The estimated average annual tax rate used for the year to 30 June 2010 is 3.69%
(2009: 1.19%). The increase is mainly due to an increase in the intercompany
loans from the Company to Central Rand Gold (Netherlands Antilles) N.V.
("CRGNV") and the disallowed interest on these loans.
15. Commitments
Group
June December
2010 2009
US$ `000 US$ `000
Design of optical ore sorter 26 -
Mining equipment 1,176 -
Fees payable to iProp Limited for prospecting - 500
1,202 500
16. 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
17. Share based payments
Grant of shares in the Company
During the six months ended 30 June 2010, the Company granted the following
shares to selected Non-Executive Directors:
Vesting Strike price Allocation Number of
shares
granted
100,000 on 28 June 2010 Exercise price Mr J. Brauns 300,000
100,000 on 17 February 2011 of GBP0.01 per
100,000 on 17 February 2012 share.
Grant of options in the Company
During the period further share options were granted to selected Executive
Directors. The options granted are summarised below:
Vesting Strike price Allocation Number of
share options
granted
500,000 on 10 February Exercise price Mr S.J. du 1,500,000
2011, 500,000 on 10 escalates in Toit
February 2012 and 500,000 accordance with
on 10 February 2013. the vesting
tranches. One
third at price
of GBP0.20, one
third at GBP0.40
and one third at
GBP0.60.
18. Related parties
Two dormant subsidiaries in the Group, Central Rand Gold Assay Laboratory
(Proprietary) Limited and Central Rand Gold Water (Proprietary) Limited, were
deregistered during the six months ended 30 June 2010. The deregistration has no
material impact on the Group.
Except for the information disclosed in Note 17 Share-based payments above, no
other disclosable related party transactions occurred in the period.
19. Events occurring after balance sheet date
On 5 July 2010 CRG placed a total of 1,328,071,380 new ordinary shares (Firm
Placing of 649,042,355 new shares and Placing and Open Offer of 679,029,025 new
shares) of GBP0.01 each in the capital of the Company at a price of GBP0.02 per
share to raise gross proceeds of US$40.4 million (GBP26.6 million).The placing
provides sufficient funds to meet the projected funding requirements of the
business for at least the next twelve months from the date of approval of the
interim financial statements.
20. Contingent liability
Damages claim
Puno has issued a summons on the Company, claiming damages, to the value of
US$17m. This action instituted by Puno against the Company out of the South
Gauteng High Court, Johannesburg, traverses issues similar to those covered by
Puno`s previous application. In particular, Puno`s damages claim is premised on
a similar interpretation of the Shareholders` Agreement as it contended for in
the previous application.
The previous application was dismissed by Acting Judge, Alan Horwitz SC, on
Thursday, 5 November 2009, with costs, including the costs of two counsel on the
grounds that Puno had failed to make out a case for the relief sought on each
and every ground which formed the subject of the application hearing. Puno`s
application for leave to appeal against the judgment was also dismissed with a
similar order as to costs. In relation to Puno`s interpretation of the
Shareholders` Agreement, the Acting Judge expressly rejected the very
interpretation on which the present action seeks to rely.
It is the Company`s considered view that the present action is thus equally ill-
founded and possibly vexatious, and while Puno has in any event failed to take
proper and appropriate steps in the institution of these proceedings, on which
basis alone the present action must be stayed, Puno`s contentions for the relief
sought are considered to be flawed and devoid of merit.
In consequence the directors are of the opinion that in as much as the action
has no prospects of success this will not have any material consequences in
respect of the consolidated accounts of the Group.
17 August 2010
Johannesburg
JSE Sponsor
Macquarie First South Advisers (Pty) Limited
Date: 17/08/2010 08:00:04 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department .
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
|
