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CRD - Central Rand Gold Limited - Interim Management Statement

Release Date: 19/05/2011 08:00:01      Code(s): CRD
CRD - Central Rand Gold Limited - Interim Management Statement                  
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                                                          
19 May 2011                                                                     
INTERIM MANAGEMENT STATEMENT                                                    
INTERIM BUSINESS PLAN UPDATE                                                    
Acid Mine Drainage ("AMD")                                                      
Since the last Company announcement dated 29 March 2011, the Company together   
with other industry stakeholders have held four meetings with the South         
African Department of Water Affairs ("DWA"). The purpose of these meetings was  
to clarify and agree on the technical principles, funding allocation and        
timing of the implementation of an interim solution to the AMD problem          
currently being experienced in the Central Basin of the Witwatersrand area.     
Following these meetings, the points set out below have been agreed:            
*    The DWA will take the lead role in co-ordinating the design and            
    implementation of the interim solution (`the Project").                     
*    The DWA has appointed an implementation agent to manage and implement the  
    Project.                                                                    
*    The South African National Treasury committed, in the 2011 National        
    Budget speech, ZAR225 million (US$32 million) to the DWA for the            
implementation of the Project. The receipt of this sum of money by the      
    DWA has been confirmed.                                                     
*    Agreement between all stakeholders that a submersible pumps station and    
    the existing High Density Sludge ("HSD") plant situated at the ERPM South   
West Vertical shaft ("SWV") will be used for the Project.                   
*    The DWA is in commercial discussions with various suppliers to acquire     
    technical engineering designs for the refurbishment of the HDS plant and    
    the submersible pump station. The acquisition of this information will      
accelerate the commencement of the Project.                                 
*    Discussions between the DWA and industry stakeholders are ongoing in       
    regard to the appropriate level to maintain the water table; the minimum    
    level set by DWA is at 150mbs at SWV (this translates to approximately      
190mbs at CRG`s mining area). However owing to the close proximity of the   
    Gold Reef City theme park to the Company`s mining area it is expected       
    that the minimum water level may reasonably be set at a lower level below   
    surface. CRG`s initial target is to stop the water table at 250mbs, where   
after a process of de-watering the Central Basin will commence. The water   
    table at SWV was approximately 450mbs, which is an improvement on the       
    anticipated water table level of 420mbs as predicted by the rate of rise    
    forecast model.                                                             
The Company has welcomed the discussions with the DWA and their commitment in   
resolving the rising AMD problem in the Central Basin. It must be noted though  
that although good progress has been made to date, until final engineering      
designs are available for the Project, the commencement date as well as at      
what level the water table can be stopped at, unfortunately remains uncertain.  
The Company therefore maintains its cautious view and will maintain its focus   
on the cash preservation measures as described in its 29 March 2011             
announcement.                                                                   
Mining operations                                                               
As previously highlighted, when developing ahead of the next planned stopes,    
between 120mbs to 180mbs, some 30% of the stopes accessed 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. The Company is currently engaged in      
various studies to try and better understand the existence of these unplanned   
double voids and determine if the resource and reserve base is materially       
affected. The results of this work are expected to be completed by July 2011.   
The Company is currently engaged in discussions with a South African mining     
contractor to commence a three month trial of conventional mining in our        
current mining area. The objective of the trial will be to understand whether   
conventional handheld in-stope drilling can be undertaken safely, reduce        
dilution and improve grade selectivity. The trial is expected to commence by    
the end of June 2011.                                                           
The Company continues with its focus of extracting all available ore from       
underground and surface. This is expected to continue until July/ August 2011,  
where after, except for the conventional trial mining, the underground          
operations will be put on care and maintenance.                                 
Toll treatment                                                                  
As previously announced the Company entered into a trial toll treatment         
agreement with Mintails SA (Pty) Ltd with the intention of assessing the        
viability of toll treating surplus ore following the suspension of the CRG      
plant capacity upgrade.                                                         
In March 2011 the Company delivered 12,000 tonnes of crushed oxides at an       
assayed grade of approximately 2.7g/t which was subsequently processed during   
April through the Mogale mill.                                                  
A final reconciliation of ore received and processed has been completed and     
the next phase of toll treating will commence by end May 2011.                  
Staff reduction                                                                 
The Company has commenced a staff reduction process in terms of section 189 of  
the South African Labour Relations Act, Act 66 of 1995.                         
Section 189 requires that once such a reduction is contemplated the Company     
undertakes a consultation process with employee representations, in terms of    
which the appropriate measures are discussed to:-                               
    -    Avoid retrenchments;                                                   
    -    Minimise the number of retrenchments; and                              
-    Mitigate the consequences of retrenchments                             
It is anticipated that staff reductions will be aligned with operational        
requirements. Dependant upon these operational requirements a total reduction   
of up to 200 people (80%) is anticipated as the Company moves into a care and   
maintenance phase.                                                              
Financial                                                                       
As at the end of April 2011 the Company had cash and near cash resources in     
the approximate amount of US$7million.                                          
OPERATIONAL UPDATE                                                              
GEOLOGY AND MINERAL RESOURCE MANAGEMENT                                         
Validation of Underground Grades                                                
The change in reef access method from On-Reef development to Footwall           
Development necessitated some changes in evaluation methodology. The previous   
method of on-reef development allowed for comprehensive reef drive sampling     
generating a very high degree of grade control and selectivity.                 
Test work has however demonstrated that underground drilling could be used to   
duplicate the drive sampling referred to above. It was deemed prudent however   
in the short term to test the application of draw-point face sampling before    
committing further capital to additional underground equipment.                 
Draw point face sampling involves channel sampling only on the exposed          
breakthrough points from the footwall drive and thus effectively only samples   
a small portion of the reef to be mined. This technique, whilst not as well     
controlled and accurate as drive sampling from a grade selectivity viewpoint,   
does allow for gross selectivity.                                               
A further strong positive from this draw point face sampling exercise was the   
additional validation of the diluted insitu grades (total extraction) used in   
the base Resource and Reserve Models, the results of which are set out below:   
Area            Type          Diluted Grade      Width (cm)   Distance          
(g/t)                          (m)                   
1596            Drive         2.81               150          40                
1583            Drive         2.23               150          4                 
1581            Drive         6.13               150          20                
1580            Drive         0.82               150          30                
1575            Drive         2.41               150          46                
1563            Drive         3.44               150          36                
1551            Drive         3.04               150          32                
1534            Drive         3.67               155          10                
1571 DP13       D Point       2.50               170          4                 
1571 DP12       D Point       4.49               177          4                 
1571 DP11       D Point       4.07               143          4                 
1571 DP10       D Point       3.10               208          4                 
1571 DP9        D Point       4.31               250          4                 
1585 DP 11      D Point       5.47               165          4                 
1585 DP 10      D Point       3.10               208          4                 
1585 DP 19      D Point       4.03               250          4                 
1557 DP 11      D Point       2.14               120          4                 
1511 DP7        D Point       5.19               146          4                 
1511 DP6        D Point       3.70               160          4                 
1511 DP5        D Point       3.52               145          4                 
1511 DP3        D Point       3.41               139          4                 
                                                                                
Diluted Grade                 3.12               155                            
During the first quarter of 2011, additional validation studies were            
undertaken by Dr Carina Lemmer, a well respected independent geostatistical     
specialist. All data gained from the extensive sampling of boreholes, trenches  
and pits during the past two years of exploration and mining as well as         
current underground face sampling was incorporated into the extensive           
historical database that was used for the initial Resource calculation. This    
new study confirmed the grades used in the resource model suggesting that an    
average diluted insitu grade of 3.14g/t over a width of 150cm could be          
expected within the current stoping area. This compares very well with the      
observed sampling data outlined in the table above.                             
Campaign Testing of Underground Sulphide Ore                                    
During the first quarter of 2011 a programme of campaigning underground ore     
from specific drawpoints was undertaken with a view to test Mine Call Factor    
and dilution assumptions used in the financial forecasts and economic models.   
To this end approximately 2,300t of sulphide ore was mined from three discrete  
mining blocks at an average grade of 3.4g/t. This material was campaigned       
through the metallurgical plant and generated a reconstituted head grade of     
2.2g/t, representing an approximate 65% Mine Call Factor. This figure compares  
with the 75% assumed in the financial model and the deviation is believed to    
be the result of hanging wall and middling dilution in unmeasureable backstope  
areas.                                                                          
It is believed that this is a manageable operational challenge that can be      
improved through better underground control and the incorporation of a surface  
waste sorting regime.                                                           
Exploration Target Material                                                     
Mineral exploration through systematic mechanical trenching, geological         
mapping, channel sampling and assaying continued unabated during the reporting  
period resulting in the identification and delineation of further open pit      
"Exploration Target" areas.                                                     
The table below details the inventory as of April 2011.                         
Mining Area            Reef            Grade Range      Tonnage Range (t)       
                                      (g/t)                                     
Central Pit            Main Reef       2.6 - 2.8        12,100 - 18,300         
Spenser Pit            Main Reef       3.1 - 3.7        15,300 - 18,500         
New Unified Pit        Main Reef       2.9 - 3.1        7,100 - 11,900          
New Unified West Pit   Main Reef       4.2 - 4.5        17,700 - 25,500         
Slot 5 Block A         White Reef      2.6 - 3.1        27,000 - 48,000         
Slot 5 Blocks B,C,D    White Reef      1.5 - 1.9        17,000 - 33,000         
Slot 7                 White Reef      2.1 - 3.2        87,000 - 200,000        
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.                                                                
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) Ltd and has   
over 17 year`s experience in exploration, mineral resource management and       
mineral evaluation.                                                             
MINING                                                                          
Key Mining Statistics                                                           
Year - To - Date                Actual                                          
January  - April 2011                                                           
Tons (t)/ meters   Grade (g/t)                   
                               (m)                                              
Decline sinking (m)             101                                             
Waste development (m)           717                                             
Footwall development (m)        583                                             
Total (m)                       1,401                                           
                                                                                
Stoping Reef(t)                 26,159             3.0g/t                       
Surface mining Reef(t)          71,717             4.3g/t                       
Development Reef (t)            21,481             1.6g/t                       
Total (t)                       119,357                                         
Surface Mining                                                                  
As highlighted in the table above, year to date 71,717 tons of surface ore at   
an average insitu grade of 4.3g/t has been mined. This cumulative total has     
been obtained from the following pits:                                          
*    Pit 1 (Central Pit) - this pit has yielded 29,848 reef tons at a grade of  
3.4g/t.                                                                     
*    Pit 2 (New Unified) - this open pit has yielded 41,869 reef tons at a      
    grade of 4.9g/t.                                                            
METALLURGY                                                                      
In the first quarter of 2011 3,026 oz of gold was produced.                     
The first two months of the year were predominantly focussed on surface oxide   
ore while the underground stopes were mined out and stockpiled. Thereafter the  
programme of campaigning underground ore from specific drawpoints as            
highlighted in the geology section above was undertaken.                        
A further benefit of undertaking this programme of campaigning underground ore  
was the ability to commission and optimise the optical ore sorter which was     
installed to remove waste (dilution) from the underground sulphide feed. The    
optical sorter has shown significant potential to effectively and economically  
remove waste prior to expensive crushing and milling downstream processes.      
An overall 94% gold recovery was achieved on underground sulphide ore in March  
as opposed to the typical 75% recovery on surface oxides. Notably, gravity      
gold recovery increased from around 30% on surface oxides up to 80% on the      
underground sulphides provided the appropriate mill grind was attained.         
A significant drop in production tons resulted from the harder underground      
sulphides which bottlenecked through the crushing circuit. This supported the   
test work done last year that informed the crushing circuit upgrade that was    
planned for mid 2011.                                                           
The March processing campaign has confirmed that industrially comparable        
recovery is achievable even at the lower end of the grade range.                
For further information, please contact:                                        
CRG                                                                             
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                                                         
Buchanan Communications Limited    +44 (0) 20 7466 5000                         
Bobby Morse / Katharine Sutton / James Strong                                   
Date: 19/05/2011 08:00:01 Supplied by www.sharenet.co.za                     
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