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CRD - Central Rand Gold Limited - Interim management statement

Release Date: 18/11/2011 09:00:04      Code(s): CRD
CRD - Central Rand Gold Limited - Interim management statement                  
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")                                          
INTERIM MANAGEMENT STATEMENT                                                    
1    Summary                                                                    
    The third quarter of 2011 has been a period of mixed fortunes for Central   
    Rand Gold. The Company has made significant progress in improving its       
    understanding of the operational uncertainties disclosed in the Company`s   
announcement dated 29 March 2011. These uncertainties included rising Acid  
    Mine Drainage in the Central Basin; the occurrence of double voids (termed  
    Composite Double Voids) within Central Rand Gold`s current mining area; and 
    the challenge of dilution when utilising the longhole stoping methodology.  
In that announcement the Company committed to providing its shareholders    
    with a re-assessment of its prospects based on the resolution of the        
    abovementioned uncertainties by the end of October 2011.                    
    This re-assessment was interrupted by a decision taken on 22 September 2011 
by the Minister of Mineral Resources of South Africa ("Minister") to cancel 
    the Company`s Mining Right. This decision was suspended on 24 October 2011  
    when the Minister consented to the temporary suspension of her decision to  
    cancel the mining right. Immediately thereafter, the Company re-commenced   
mining operations and, by mid November 2011, 10,650 tonnes from surface and 
    2,697 tonnes from underground mining were delivered to the Metallurgical    
    plant and stockpile.                                                        
2.   Sale process                                                               
As announced on 19 September 2011, Central Rand Gold has rejected all       
    takeover approaches received to date. Until the Company has greater         
    certainty with regards to its Mining Right, it does not believe that the    
    environment is conducive for any type of corporate transaction and, as      
such, the board of directors of Central Rand Gold is not currently          
    considering the sale of the entire issued share capital of the Company      
    until this uncertainty is resolved. Accordingly, and following consultation 
    with the Takeover Panel, the Company confirms that it is no longer deemed   
to be in an `Offer Period` for the purposes of the City Code on Takeovers   
    and Mergers.                                                                
    The Company will continue with underground mining operations as highlighted 
    below, building further confidence in its mining methodology and reviewing  
further opportunities with regards to its extensive prospecting areas.      
3.   Mining right challenge                                                     
    As stated in the announcement dated 24 October 2011 ("the Announcement"),   
    the Minister consented to the temporary suspension of her decision to       
cancel the mining right granted to Ferreira Estate and Investment Company   
    Limited ("FEIC"), the registered holder of Central Rand Gold`s mining right 
    under departmental reference number GP30/5/1/1/2/140MR.                     
    As further stated in the Announcement, the suspension of the Minister`s     
decision to cancel the mining right, which was enforced in terms of a court 
    order granted by the North Gauteng High Court, Pretoria ("High Court"), is  
    an interim arrangement pending final relief in the High Court to review and 
    set aside the Minister`s decision to cancel the mining right. These review  
proceedings have already been instituted against the Minister and her       
    departmental corespondents.                                                 
    Shareholders will be kept abreast of developments in these review           
    proceedings as they unfold.                                                 
4.   Operational update                                                         
    Mining operations                                                           
Mine production to date has been as follows:                                    
                         Tonnes               Average Mined Grade               
Longhole Stoping          39,686               1.7 to 1.9 grams per tonne       
Conventional Stoping      12,707               3.6 to 5.5 grams per tonne       
Surface mining            171,606              2.8 to 3.3 grams per tonne       
Total                     223,999                                               
Minor discrepancies exist between Mining tonnages, Stockpile Tonnages and Plant 
throughput due to broken/crushed ore relative density estimates and survey      
volumetric analysis.                                                            
Longhole Stoping                                                                
In the initial 2009 trial, longhole stoping was successful, realising only a    
modest amount of hanging wall dilution. However, when full production was       
attempted, in other areas of the Mine, there was often in excess of 200%        
dilution by zero grade material, due to excessive hanging wall failure. This    
dramatically affected the economics of this methodology and it was suspended in 
May 2011.                                                                       
Conventional hand-held stoping                                                  
The introduction of conventional Jack-Hammer mining techniques in July 2011 has 
significantly improved the situation. This method uses much shorter shotholes   
(approximately one metre in length) which consequently carry a much reduced     
concussive charge. Even if hanging wall failure due to delamination is          
experienced, 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 installing         
additional support. As a result of the controlled breaking, an improvement in   
overall grade reduction of only 23% from insitu to stockpile has been achieved. 
In the absence of actual ore processing, this figure can be considered to       
approximate to a calculated Mine Call Factor of 77%.                            
Underground mining operations re-commenced on 1 November 2011 and the Company   
estimates that an additional 200,000 tonnes of underground ore material can be  
accessed and mined with limited mine development being required. The Company`s  
initial 12-month target will be to increase and maintain underground mine       
production to approximately12 000 tonnes per month.                             
Current performance suggests that this is the future economic direction for this
Surface mining                                                                  
Surface mining continues to perform well with an average insitu (undiluted)     
grade of 4.3 grams per tonne and an average stripping ratio of 1:9 from January 
2011 to date, which is below the target ratio of 1:10.                          
As of 31 October 2011, between 53,000 tonnes and 102,000 tonnes of Exploration  
Target material is estimated to remain in the immediate Slot 8 surface mining   
area. This material has been systematically mechanically trenched, geologically 
mapped and lithologically sampled and assayed for gold and is estimated to run  
at grades of between 1.6 grams per tonne and 3.2 grams per tonne. There is scope
to increase the potential grade of this material at the expense of tonnage      
through ongoing in-pit grade control.                                           
This free digging material will be excavated, blended and processed in the      
Company`s carbon-in-pulp ("CIP") gold recovery plant with a view to testing and 
better determining mined grades and tonnages, plant throughput characteristics, 
metallurgical recoveries, as well as to assist in generating income for the     
Included in this category of Exploration Target is an estimate of clean-up      
residue from the current ore stockpile and spillage areas in the vicinity of the
now decommissioned Bateman concentrator unit.                                   
It is estimated that the Exploration Target material will be exhausted towards  
the end of the first quarter of 2012 and the standing stockpiles of surface     
material will be fully depleted towards the end of May 2012.                    
Central Rand Gold Main Reef/Leader Exploration Target Summary                   
Mining Area           Reef2      Exploration Target Material1                   
Spenser               MR&MRL     2.7-3.2 grams per    18000 - 22000             
tonne                tonnes                     
New Unified           MR&MRL     1.6-2.3 grams per    15000 - 30000             
                                tonne                tonnes                     
ROM Pad Cleanup       Various    1.6-3.2 grams per    20000 - 50000             
tonne                tonnes                     
Notes:  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 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.                                       
    2:        "MR" refers to the Main Reef and `MRL` refers to the Main Reef    
Ore processing through the Bateman Concentrator unit was discontinued at the end
of June 2011 due to less than satisfactory availability and relatively subdued  
gold recovery rates.                                                            
Availability for the period January 2011 to June 2011 was 60%, primarily due to 
the crushing and communition of hard underground sulphide ore. It was felt that 
the substantial capital upgrade required for the Bateman crushing circuit would 
not be the best use of available funds at the current levels of ore production  
and that greater effort should be made optimising the performance of the CIP    
Further to this, average gold recoveries of 77% were achieved through the       
Bateman flotation circuit, which, whilst in line with planned factors, could not
be substantially increased through further engineering.                         
Approximately 38,507 tonnes of ore was processed through the Bateman during the 
The CIP plant continued to perform well, processing approximately 98,096 tonnes 
at an average built up gold grade of 2.81 grams per tonne for the period January
to September 2011. Gold recoveries rose from 90% to 93%, and availability rose  
from 90% to 91%.                                                                
At the end of September 2011 surface oxide ore, underground sulphide ore and    
reef development stockpiles were estimated at 56,483 tonnes an average grade of 
2.73 grams per tonne.                                                           
Toll Treatment                                                                  
Following the success of the previous high grade tailings toll treatment        
campaign undertaken in conjunction with a neighbouring processing plant operated
by Mintails Limited ("Mintails"), the Company is pleased to announce a further  
trial toll treatment programme whereby approximately 30,000 tonnes of           
underground ore is scheduled to be treated at the Mintails Mogale gold facility.
This 90-day campaign will allow for the monetisation of surplus underground ore 
and existing underground stockpiles through external processing while the       
Central Rand Gold plant is operating at nameplate capacity with surface         
material. This arrangement may be extended to cover ore surplus to plant        
capacity beyond this initial trial period.                                      
5.   Financial Update                                                           
    Cash and cash equivalents at 31 October 2011 are reported at US$4.6 million 
    compared to US$4.8 million in June 2011. Significant cash movements during  
    the four-month period to end October 2011 can be attributed mainly to trial 
conventional mining activities and the further retrenchment of 118          
    employees. These cash movements were however, mitigated by reduced security 
    deposits and further extraction of nearby surface materials producing       
    approximately 4,928 ounces of gold at a cash cost of US$1,401 per ounce.    
Gold production for the year up to October 2011 amounted to 12,116 ounces.  
    Gold production was severely impacted due to the temporary suspension of    
    all mining activities as a result of the Minister`s cancellation of the     
    Company`s mining right. The Company expects to produce approximately 1,000  
ounces per month for the remainder of the year.                             
    Set out below is an abridged cash flow statement for the four months to end 
    October 2011.                                                               
                                                        US$ Million             
Cash and cash equivalents at 1 July 2011            4.8                     
    Gold sales                                          8.2                     
    Cash used in operations                             (10.2)                  
    Reduction of security deposits                      1.4                     
Proceeds on sale of assets                          0.5                     
    Interest received                                   0.4                     
    Effects of exchange rate movements on cash          (0.5 )                  

    Cash and cash equivalents at end October            4.6                     
6.   Strategic review                                                           
    Since March 2011, the Company has been working on resolving the following   
three key operational uncertainties, impacting on the future prospects of   
    the Company:                                                                
-    Acid Mine Drainage;                                                        
-    Composite Double Voids; and                                                
-    Completion of conventional mining studies.                                 
Acid Mine Drainage                                                              
The Company continues to engage with the South African Government ("Government")
around the issue of the rising water table in the Central Basin. Trans Caledon  
Tunnel Authority ("TCTA") (appointed implementing agent by the Minister of Water
Affairs) has completed its due diligence on developing a solution for the       
Central Basin. This solution was presented to the Government`s Portfolio        
Committee on Water and Environmental Affairs, on 7 September 2011. 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.                                
*    The sale of grey water, where possible.                                    
TCTA has issued a single tender for all three basins and tenders are expected to
be adjudicated and awarded by January 2012, with the pump station being         
commissioned by September 2012. A concern remains with regards to funding, as   
TCTA still awaits for National Treasury to allocate and commit funds for the    
full implementation of the AMD solution across all three basins. The Company is 
currently in discussions with TCTA to agree on the principles of dewatering the 
Central Basin below ECL.                                                        
Composite Double Voids                                                          
Following an internal study undertaken by Mr Keith Matier ("the Study") it was  
possible to isolate areas of the greatest potential for Composite Double Voids  
and, further, to compare the impacted areas with the remaining unaffected areas.
Based upon the outcome of the Study, it is estimated that the impacted area for 
0 to 450mbs represents less than 5% of the total Resource base for such depth   
range within the Consolidated Main Reef leasehold. Furthermore, only an         
estimated 38% of the impacted 5% is believed to represent areas of Composite    
Double Voids.                                                                   
As the total combined impact of Composite Double Voids as determined by this    
Study is less than 3% of the area affected, it is not deemed necessary to adjust
the Main Reef Mineral Resource base.                                            
The full report is available on the Company`s website: www.centralrandgold.com. 
The success of the trial phase of the conventional stoping methodology was      
announced on 10 October 2011. This announcement included reference to the       
publication on the Company`s website of the conceptual level study undertaken by
specialist mining engineering company, Minequest Consult (Proprietary) Limited, 
with regards to the Life of Mine Plan for the CMR West area. This study revealed
that within the CMR West mining area, a financially successful hybrid mining    
methodology can be implemented and a production rate between 35,000 tonnes to   
50,000 tonnes per month could be achieved. The full report is available on the  
Company`s website: www.centralrandgold.com.                                     
Whilst the success of the conventional mining trial gives the Company a great   
deal of encouragement, Central Rand Gold still faces a number of significant    
challenges that need to be addressed. The Company continues to work towards     
finding solutions to these challenges, building on the progress made with the   
new stoping methodology, and looks forward to updating shareholders as          
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                                                                    
Note: The information in this statement relating to Mineral Resources and       
geology has been reviewed and approved by Mr Matier, BSc (Hons), GDE, Pr Sci    
Nat, who is a competent person in terms of the SAMREC and JORC codes. Mr Matier 
is the Geology Manager of Central Rand Gold South Africa (Proprietary) Limited  
and has over 17 years` experience in precious metal exploration, mineral        
resource management and evaluation.                                             
18 November 2011                                                                
JSE Sponsor                                                                     
Merchantec Capital                                                              
Date: 18/11/2011 09:00:03 Supplied by www.sharenet.co.za                     
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