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CRD - Central Rand Gold Limited - Operational update

Release Date: 10/10/2011 08:00:02      Code(s): CRD
CRD - Central Rand Gold Limited - Operational update                            
Central Rand Gold Limited                                                       
(Incorporated as a company with limited liability under the laws of             
Guernsey,                                                                       
Company Number 45108)                                                           
(Incorporated as an external company with limited liability under the           
laws of South Africa,                                                           
Registration number 2007/0192231/10)                                            
ISIN: GG00B24HM601                                                              
LSE share code: CRND    JSE share code: CRD                                     
("Central Rand Gold" or the "Company")                                          
OPERATIONAL UPDATE                                                              
Introduction                                                                    
On 29 March 2011, Central Rand Gold identified three critical challenges        
facing the Company, which included the rising water table in the Central        
Basin, the appearance of double voids (termed Composite Double Voids) and       
the challenges of dilution through its proposed long hole stoping               
methodology.                                                                    
The issue around Composite Double Voids was comprehensively addressed in        
an announcement issued by the Company on 15 September 2011. Not only was        
the impact of the Composite Double Voids demonstrated to be minimal, the        
impacted areas were also shown to be relatively predictable.                    
Accordingly, the Company provides the following update with regards to          
the remaining challenges, namely the rising water table and the dilution        
challenges resulting from the proposed long hole stoping methodology.           
1.   Rising water table                                                         
The Company continues to engage with the South African Government               
("Government") around the issue of the rising water table in the Central        
Basin. As reported on 27 July 2011, the Ritz submersible pumps ("pumps")        
were successfully tested in Germany in the presence of Trans Caledon            
Tunnel Authority ("TCTA") (appointed project managers by the Department         
of Water Affairs). The pumps will remain in Germany until such time as          
clarity with regards to Company`s Mining Right has been obtained.               
On 7 September 2011, having completed its due diligence on developing a         
solution for the Central Basin, TCTA presented a proposed solution to the       
Government`s Portfolio Committee on Water and Environmental Affairs. The        
proposed solution includes:                                                     
*    A commitment to protect the Environmental Critical Level ("ECL") in        
    the Central Basin at 186 metres below surface ("mbs"). This                 
represents an approximate level of 225mbs in Central Rand Gold`s            
    mining area.                                                                
*    The construction of a New High Density Sludge Plant with a plant           
    capacity of 84 million litres per day next to the South West                
Vertical Shaft.                                                             
*    Utilisation of Central Rand Gold`s pumps to de-water and maintain          
    the Central Basin.                                                          
*    The transfer of treated water via pipeline to Elsburg Spruit.              
*    Co-disposal with Durban DRD Gold of sludge via dual lines.                 
*    The sale of grey water, where possible.                                    
It is anticipated that construction will commence in January 2012, with         
commissioning occurring in August 2012.                                         
TCTA will now approach the National Treasury Department for additional          
funding as the R225 million (US$27 million) initially allocated to              
resolve the entire Acid Mine Drainage problem in the Witwatersrand area         
has proven to be insufficient; a revised budget of R924 million (US$114         
million) has been proposed.                                                     
2.   Feasibility of Conventional Hand Held Stoping                              
One of the main contributing factors leading to the decision to abandon         
the mechanised longhole stoping previously undertaken at the mine, was          
the very significant amount of zero grade material arising from the             
immediate hanging wall of the Main Reef Leader, which was significantly         
diluting the ore being processed.                                               
Joints and bedding planes within the rocks above the reef have, over            
time, become separated and, to a large extent, delaminated. The explosive       
concussion associated with the original longhole stoping, which                 
necessitated the drilling of blastholes up to 15 metres in length, often        
exacerbated the delamination, causing slabs consisting of barren hanging        
wall waste in excess of two metres to dilute the reef ore. Without the          
means to efficiently remove this barren material from the broken ore, it        
became rapidly apparent that the method of longhole extraction of reef          
ore is not economically viable.                                                 
A more conservative, hand-held conventional technique was therefore             
proposed as a potential solution to address this dilution challenge. The        
Company identified three key points against which this study should be          
evaluated:                                                                      
1.   Can the reef be safely stoped using the proposed conventional means?       
2.   Can dilution from the hanging wall be eliminated or managed?               
3.   Is the methodology commercially viable?                                    
Safety in the conventional stoping trial                                        
In June 2011, Central Rand Gold initiated a trial phase of conventional         
hand-held stoping in selected pre- developed areas. To this end, the            
Company engaged the services of specialist conventional South African           
mining entity, Sekgwa Mining Services (Proprietary) Limited ("Sekgwa            
Mining"), for a three month period. Sekgwa Mining has both the relevant         
experience and necessary competence in scattered conventional mining.           
During the three months of conventional trials, the Company has not had a       
single accident resulting from an uncontrolled fall of ground. This has         
been achieved through a support structure of 1.8 metre long resin bolts         
in on reef development, 150 millimetre to 200 millimetre elongates              
installed in a tight one metre by one metre grid within stope panels and        
a line of three stick clusters on a one metre spacing every 10 metres on        
strike. In addition, three stick clusters are installed at one metre            
spacing along gullies and raises.                                               
The Company is satisfied that conventional stoping techniques can be            
undertaken safely.                                                              
Dilution Management in the conventional stoping trial                           
In table 1 a comparison is made of the impact of hanging wall dilution          
arising from the three mining methods trialled to date, namely "Reef            
Drive Longhole Stoping", "Footwall Drive Longhole Stoping" and                  
"Conventional Hand Held Stoping".                                               
Table 1: Impact of dilution with different mining methods.                      
Working  Method        Insitu  Stopping/Actual  Belt/Stockp Observed  Insitu to 
Place                  Main    Cut Values       ile Values  Total     Belt      
Reef                                 Dilution  Grade      
                      Values                                         Reduction  
1534RD   Reef Drive    5.03g/t 1.8g/t / 325cm   1.72g/t     207%      66%       
        Longhole      / 106cm                                                   
15719_13 FW Drive      4.51g/t 2.43g/t / 293cm  1.71g/t     95%       62%       
        Longhole      / 150cm                                                   
15113_10 Conventional  4.44g/t 4.13g/t / 206cm  3.41g/t     29%       23%       
        Hand Held     / 160cm                                                   
The Reef Drive Longhole stoping method was successful in the initial 2009       
trial area and realised only a modest amount of hanging wall dilution.          
However, when full production was attempted it was observed that there          
was in excess of 200% dilution by zero grade material, due to the               
excessive hanging wall failure. Whilst the Reef Drive method did allow          
for limited underground and surface waste sorting, the reduction in grade       
from insitu to stockpile was in excess of 60% which was clearly not             
acceptable.                                                                     
The replacement mechanised mining technique, involving the development of       
the Footwall drives and cross-cutting to the reef at regular intervals,         
was certainly effective in reducing high development costs.                     
Unfortunately, the excessive blast concussion from longhole stoping             
recreated a similar pattern of hanging wall dilution to that previously         
observed. The mining area where this methodology was initially employed         
showed less dilutive hanging wall (due presumably to localised lower            
incidence of jointing). Unfortunately, the ability to conduct waste             
sorting underground and on surface was hampered due to the constricted          
nature of the draw-point geometry, which required regular re-blasting of        
hanging wall slabs, which frequently choked the draw-points. As a result        
of this inability to remove dilution, the actual reduction in grade from        
insitu to stockpile was also shown to be in excess of 60%. Consequently,        
this methodology is not economically viable.                                    
The introduction of hand-held conventional mining has been shown to             
improve the situation significantly. This method uses much shorter              
blastholes (around one metre in length) which consequently carry a much         
reduced concussive charge. Even if there is hanging wall failure due to         
delamination, it is limited to the one metre blasted panel advance and          
can therefore be easily sorted and contained prior to tramming. Hanging         
wall support between blasts allows for the continuous assessment of             
hanging wall dilution and remedial action such as barring or implementing       
additional support. As a result, an improvement in overall grade                
reduction of only 23% from insitu to stockpile was measured. In the             
absence of actual ore processing, this figure can be considered to              
approximate to a calculated Mine Call Factor of 77%.                            
It is also important to highlight the fact that of the three methods            
employed to date, conventional hand-held stoping is the most amenable to        
selective mining which allows for a high degree of flexibility and              
optimisation.                                                                   
Commercial viability of conventional stoping                                    
In addition to contracting Sekgwa Mining to test the practicalities of          
conventional hand held mining, a specialist mining engineering                  
consultancy, MineQuest Consult (Proprietary) Limited ("MineQuest"), was         
engaged to develop a Life of Mine ("LOM") feasibility and economic study        
on the western portion of the CMR property to a depth of approximately          
450 mbs. MineQuest`s initial study was based on a hybrid mining style           
combining conventional hand-held stoping and mechanised development and         
tramming.                                                                       
The initial study concluded that a 30 000 to 40 000 ounce per annum             
operation is viable, giving a LOM of approximately 12 years. This initial       
study and schedule estimates a project cash operating cost (mine site           
cash expenses which includes direct mining, ore processing and on-site          
general and administrative costs) of R427 per ton (US$779/oz) and total         
production cost (cash operating costs plus capital expenditure which            
includes plant, equipment and development costs) of R586 per ton                
(US$1,068/oz). If the initial mine plan was implemented, approximately          
700 new jobs could be created during the course of the CMR West LOM. The        
full report was supplied to the Department of Mineral Resources in              
support of a rescaling of the Company`s original mine work programme.           
A further report was subsequently compiled by MineQuest to optimise the         
CMR West mining plan maximising extraction economics. The optimised 50          
000 ounce per annum plan suggests a cash operating cost of R342 per ton         
(US$623/oz) and total production cost of R492 per ton (US$899/oz) and a         
positive LOM net operating cashflow of R1.5 billion (US$187 million) at         
an average gold price of $1,613 per ounce.  The complete MineQuest              
scoping study is available on the Company`s website:                            
www.centralrandgold.com                                                         
Way Forward                                                                     
The Company believes that the new conventional mining method is scalable        
and repeatable across its tenement area, which would enable the creation        
of the original `string of pearls` concept. There remains sufficient            
mineral inventory on both CMR East and Crown West to establish two              
similar sized operations that could be brought on line in parallel with         
the proposed CMR West operation and generate a significant number of            
additional jobs over and above the 700 required under the mine plan for         
CMR West.                                                                       
In light of the Department of Mineral Resources` cancellation of the            
Company`s Mining Right, the implementation of the above plan can only be        
considered once its has successfully appealed the Minster`s decision. The       
Company, dependant on court availability, hopes that its appeal will be         
heard by the Pretoria High Court by end October 2011.                           
For further information, please contact:                                        
Central Rand Gold                                 +27 (0) 11 674 2304           
Johan du Toit / Patrick Malaza                                                  
Evolution Securities Limited                      +44 (0) 20 7071 4300          
Chris Sim / Neil Elliot                                                         
Merchantec Capital                                +27 (0) 11 325 6363           
Roger Pitt / Monique Martinez                                                   
Buchanan                                          +44 (0) 20 7466 5000          
Bobby Morse / James Strong                                                      
Jenni Newman Public Relations                                                   
(Proprietary) Limited                             +27 (0) 11 506 7351           
Jenni Newman                                                                    
10 October 2011                                                                 
Johannesburg                                                                    
JSE Sponsor                                                                     
Merchantec Capital                                                              
Date: 10/10/2011 08:00:02 Supplied by www.sharenet.co.za                     
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