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CRD - Central Rand Gold Limited - Operational and strategic review and

Release Date: 29/03/2011 10:10:03      Code(s): CRD
CRD - Central Rand Gold Limited - Operational and strategic review and          
commencement of offer period suspension of underground mining operations        
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                                                          
SUSPENSION OF UNDERGROUND MINING OPERATIONS                                     
Acid Mine Drainage ("AMD")                                                      
On 7 February 2011 Central Rand Gold Limited announced certain cash conservation
measures pending confirmation from the South African Government of its          
commitment and financial participation to the AMD projects in the Witwatersrand 
mining basins. The Company further advised that, "Shareholders should be in no  
doubt that if a clear and positive way forward is not identified by end of March
2011 the prospects of the Company will need to be evaluated."                   
The Company has now reviewed the Report to the Inter-Ministerial Committee      
published on 24 February 2011 by the Department of Water Affairs of the South   
African Government and has attended two meetings with the South African         
Government in pursuit of further clarity. The Company has now evaluated its     
prospects in terms of the perceived AMD risks and its short-term production     
situation and concludes as follows:                                             
- Whilst the publication by the South African Government of the AMD Report and  
review thereof in subsequent meetings with Government have been very welcome in 
that they have  crossed  the first hurdle of a commitment towards resolution of 
this major environmental issue; however, there  remains insufficient  clarity on
key issues such as targeted minimum water levels, project engineering and       
technology, the role and responsibilities of the interested parties, cost       
allocation between interested and affected parties and timing to meet the degree
of definition needed by the Company to continue development and mining at the   
present rate.                                                                   
- The submersible pumps, ordered and paid for by the Company at a cost of       
Euro3.5 million , and due for delivery in August 2011 have a capacity to pump 72
million litres of water per day compared to the average daily ingress of 55     
million litres. Should it be decided to utilise these pumps and the engineering 
already completed for the ERPM South West Vertical shaft dewatering station     
these pumps have the capability to dewater the Central Rand Basin and restore   
CRG`s Reserves. In the event that these pumps are not utilized for this purpose 
the Company will sell them                                                      
- The need to have this (or some alternative equivalent) capacity installed by  
December 2011 in order to protect the 250 metre below surface (mbs) level and   
enable gradual de-watering thereafter, and the timelines inherent in the Western
Utility Corporation`s technical proposals informed the previously published need
for definition by the end of March 2011.                                        
There is much to be done to close the gap between the general commitments of the
Government and the Company`s specific needs. Whilst there is no doubt that this 
will all be resolved, everything hangs on the timing, which is disappointingly  
uncertain. In the face of these uncertainties concerning depth, the obvious     
alternative is to maximise development and mining in the upper levels.          
Underground Mining                                                              
Mine Development                                                                
Underground development has averaged 470 metres per month, in the process       
confirming the practicality of the new footwall development programme together  
with the re-designed long-hole stoping and support patterns.                    
In developing ahead of the next planned stopes, between 120mbs to 180mbs, some  
30% of the stopes accessed in the current mining area have been found to have   
unexpected "double-voids", i.e. not only has the original Main Reef Leader been 
extracted but also the Main Reef which was not indicated on the historical      
mining plans. Mine planning, based on the trial-mining programme of early 2009, 
included only for the loss, for value and "void" reasons, of some 10% of the    
This has the effect of slowing down the rate of access to mineable stopes,      
consequently increasing the cost of development per ton of accessible ore, and, 
most significantly in the short-term, dramatically reducing immediate revenue   
projections. This has unsustainable consequences for the Company`s cash         
Evidence from development on lower levels suggest that the "double-void"        
phenomenon decreases with depth, leading to the interpretation that these voids 
are a result of unmapped remnant mining on retreat by the previous mining       
In the face of these "voids" at shallow levels standard mining practice would be
to go deeper, however, as a result of the rising water table, this is not an    
option available to the Company in the interim.                                 
Mining Grade                                                                    
A third-party process aimed at confirming and verifying the planned mining      
grades for the immediate mining area was undertaken during March 2011. Current  
underground development sampling, surface diamond drilling results and surface  
trench sampling results were incorporated into the existing historical database.
The updated database was then re-evaluated by Dr Carina Lemmer. This process    
resulted in the verification of the original Resource figures and validated the 
in-situ grades incorporated in the mine plan.                                   
Mine Production                                                                 
The first two footwall-accessed stopes were mined in March 2011, producing      
approximately 2.300 tonnes of ore at an in-situ grade of 3.4g/t.                
Comparison to a "built-up" head grade, back calculated from in-plant and tails  
sampling, indicates a current Mine Call Factor of approximately 65%, compared to
budgeted values of around 75%. Since the Main Reef is breaking cleanly on the   
footwall the only conclusion is that a considerable proportion of vintage       
hanging wall (over and above the planned-for "middling") is diluting the mined  
ore. A programme to refine the blasting and ore-handling techniques, including  
trial testing of "split-firing" of middlings plus old hanging from reef is the  
next stage.                                                                     
The "empty tons" associated with this dilution severely impact the cost per     
ounce of gold produced and the short-term cash flows while this gap between     
planned and actual is being closed.                                             
The optical ore sorter, commissioned in February 2011, will continue to be      
optimised to increase removal of waste dilution without sacrificing gold        
Interim Business Plan                                                           
Pending meaningful definition of the engineering, costing and timing issues     
surrounding the AMD project it is not prudent to continue with down-dip         
Pending clearer definition of the impact of "double-voids" on short-term        
reserves it is not affordable to continue development on the upper levels.      
The major focus of the mining in the next 3- 4 month period will be further     
investigation of viable methods to reduce dilution in the currently available   
The implications of the above on the Company`s short term business plan can be  
summarised as follows:                                                          
- Underground capital development operations will be suspended effective 30     
April 2011 after opening up the next stoping level which appears to have minable
reef with fewer "double-voids".                                                 
- The currently available stopes will be mined out, thereby generating near term
cashflow. This is expected to yield 30,000 tons of reef at an in-situ (Main Reef
plus Middling) grade of 3.14 g/t. This programme, which will take three months, 
will also be utilised to develop and refine blasting and waste separation       
- A study into the feasibility of selectively mining appropriate areas by       
conventional handheld in-stope drilling in order to reduce dilution and improve 
grade selectivity as an additional methodology is currently underway.           
- To the extent affordable, a programme of surface and underground drilling to  
verify the presence of Main Reef (i.e. to define the "double-void" issue) in    
near-term mining reserves will be undertaken                                    
- Except for underground exploration work, underground operations will be placed
on a "care and maintenance" basis following extraction of the the immediately   
available stopes.                                                               
- Surface mining of currently defined SAMREC and JORC Exploration Target        
Material (between 63 000 tonnes and 76,000 tonnes at an expected head grade of  
approximately 3.2g/t) will continue until exhausted; this is expected to occur  
around September 2011.                                                          
- The commercial viability of treating all existing ore through a third-party   
toll treating agreement will be reviewed.                                       
- A financial feasibility study of processing high grade tailings will be       
- In the interim CRG`s metallurgical operations will continue to process all    
surface and underground ore.  If a decision is made to toll treat, or if all    
stock piles have been depleted, the metallurgical plant will be cleaned out to  
recover all in-process stock.                                                   
- The Company will commence a process of reducing its staff complement to ensure
alignment with the above business plan.                                         
The Company currently has cash and near cash resources in the approximate amount
of US$10million and is thus expected to have sufficient cash resources to meet  
all outstanding commitments until mid-2012.                                     
Strategic Review                                                                
The Company`s very substantial gold resource base remains intact and in part has
recently been reconfirmed. Work to demonstrate economically viable extraction   
has progressively eliminated certain approaches and has highlighted the keys to 
success - which future planning intends to deliver. A combination of this focus,
plus much clearer direction from Government on dealing with AMD pumping and     
treatment, together with the consequent ability to physically access the        
relatively "double-void" free deeper levels, should allow the Company to show   
its real value.                                                                 
Given resolution and progress on the above-listed uncertainties, the Company    
expects to be able to re-assess its prospects by end of October 2011. Part of   
this re-assessment will be the questions of further funding and possible other  
corporate actions.                                                              
In the interim, given the continued difficulties and uncertainties faced by the 
Company, the Board continues to look at all strategic options for the Company   
one of which could lead to an offer for the entire issued share capital of the  
Company. However, this option is at an early stage and there can be no certainty
that an offer for the Company will be forthcoming.                              
Note: The potential quantity and grade described by the term "Exploration       
Target" is conceptual in nature and there has been insufficient exploration to  
define a Mineral Resource and it is uncertain if further exploration will result
in the definition of a Resource. Further exploration work is ongoing and        
includes trial mining and processing of this shallow target to establish grade  
and orebody continuity, mineability, dilution and throughput characteristics    
For further information, please contact:                                        
Johan du Toit                                +27 (0) 11 674 2304                
Patrick Malaza                               +27 (0) 11 674 2304                
Evolution Securities Limited                      +44 (0) 20 7071 4300          
Chris Sim / Neil Elliot                                                         
Macquarie First South Advisers (Pty) Ltd               +27 (0) 11 583 2000      
Annerie Britz / Melanie de Nysschen/ Yvette Labuschagne                         
Buchanan Communications Limited                   +44 (0) 20 7466 5000          
Bobby Morse / Katharine Sutton / James Strong                                   
Disclosure requirements of the Takeover Code (the "Code")                       
Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of    
any class of relevant securities of an offeree company or of any paper offeror  
(being any offeror other than an offeror in respect of which it has been        
announced that its offer is, or is likely to be, solely in cash) must make an   
Opening Position Disclosure following the commencement of the offer period and, 
if later, following the announcement in which any paper offeror is first        
identified. An Opening Position Disclosure must contain details of the person`s 
interests and short positions in, and rights to subscribe for, any relevant     
securities of each of (i) the offeree company and (ii) any paper offeror(s).    
An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must     
be made by no later than 3.30 pm (London time) on the 10th business day         
following the commencement of the offer period and, if appropriate, by no later 
than 3.30 pm (London time) on the 10th business day following the announcement  
in which any paper offeror is first identified. Relevant persons who deal in    
the relevant securities of the offeree company or of a paper offeror prior to   
the deadline for making an Opening Position Disclosure must instead make a      
Dealing Disclosure.                                                             
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1%  
or more of any class of relevant securities of the offeree company or of any    
paper offeror must make a Dealing Disclosure if the person deals in any relevant
securities of the offeree company or of any paper offeror. A Dealing Disclosure 
must contain details of the dealing concerned and of the person`s interests and 
short positions in, and rights to subscribe for, any relevant securities of each
of (i) the offeree company and (ii) any paper offeror, save to the extent that  
these details have previously been disclosed under Rule 8. A Dealing Disclosure 
by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm   
(London time) on the business day following the date of the relevant dealing.   
If two or more persons act together pursuant to an agreement or understanding,  
whether formal or informal, to acquire or control an interest in relevant       
securities of an offeree company or a paper offeror, they will be deemed to be a
single person for the purpose of Rule 8.3.                                      
Opening Position Disclosures must also be made by the offeree company and by    
any offeror and Dealing Disclosures must also be made by the offeree company,   
by any offeror and by any persons acting in concert with any of them (see Rules 
8.1, 8.2 and 8.4).                                                              
Details of the offeree and offeror companies in respect of whose relevant       
securities Opening Position Disclosures and Dealing Disclosures must be made    
can be found in the Disclosure Table on the Takeover Panel`s website at         
www.thetakeoverpanel.org.uk, including details of the number of relevant        
securities in issue, when the offer period commenced and when any offeror was   
first identified. If you are in any doubt as to whether you are required to make
an Opening Position Disclosure or a Dealing Disclosure, you should contact the  
Panel`s Market Surveillance Unit on +44 (0)20 7638 0129.                        
Date: 29/03/2011 10:10:02 Supplied by www.sharenet.co.za                     
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