CRD - Central Rand Gold - CRG is pleased to announce its annual results for Release Date: 02/04/2012 10:02:08 Code(s): CRD
CRD - Central Rand Gold - CRG is pleased to announce its annual results for
the year ended 31 December 2011.
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
Registration number 2007/0192231/10)
LSE share code: CRND JSE share code: CRD
("Central Rand Gold" or the "CRG" or the "Company")
Annual Report Release
CRG is pleased to announce its annual results for the year ended 31 December
* Successful conventional mining trials completed supporting a financially
viable hybrid mining technology that could achieve a production rate of
35,000 to 50,000 tonnes of ore per month.
* Resolution of mining right dispute with the South African Department of
* No fatalities for the fourth consecutive year.
14,856 ounces of gold produced compared to 9,321 ounces in 2010.
* Submersible pumps to dewater Central Basin successfully tested.
Cost base and infrastructure aligned with current operations.
" Having negotiated a very challenging period in 2011 when the Company`s
mining right was under threat, it is pleasing to be looking forward to a much
more certain environment in 2012" - Johan Du Toit
For full copies of the Company`s Annual Report and Accounts, including the
Company Profile, Directors` Report, Corporate Governance and Sustainable
Development Report, Directors` Responsibility Statement, Company Secretarial
Confirmation, Auditor`s Report and full Financial Statements, please refer to
the Company`s website: www.centralrandgold.com.
In addition, the notice of the 2012 annual general meeting to be held on
Tuesday 24 April 2012 has now been released using electronic means.
Shareholders should, therefore, download copies of the circular, notice and
forms of proxy at www.centralrandgold.com.
Shareholders are advised that the annual general meeting ("AGM") of the
Company is to be held at the offices of Carey Olsen, Carey House, Les Banques,
St Peter Port, Guernsey, GY1 4BZ (not at the registered office) at 11:00 (UK
time) on 24 April 2012. Shareholders wishing to participate in the AGM in
Guernsey via video link from London may do so at the offices of K & L Gates,
One New Change, London, EC4M 9AF. Shareholders in South Africa wishing to
participate in the AGM via video link from Johannesburg may do so at the
offices of Rudolph, Bernstein & Associates, Block B, 7 Eton Road, Sandhurst,
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
Merchantec Capital +27 (0) 11 325 6363
Marcel Goncalves / Monique Martinez
Buchanan Communications Limited +44 (0) 20 7466 5000
Bobby Morse / James Strong
Jenni Newman Public Relations (Proprietary) Ltd +27 (0) 11 506
I present to you the annual report of a Company that is altogether in a more
positive space than it was this time last year.
While it has been a turbulent year, dramatic progress has been made on many of
the significant problems that faced the Company.
* The South African Government has now committed to resolving the
underground Acid Mine Drainage ("AMD") issues that affect the whole
Witwatersrand Basin, and whose rising water table threatened our Mineral
Reserves and Resources. Engineering of this project is well under way.
* Ground-breaking analysis by the Company`s geologists has tamed the
seemingly random nature of "composite double voids" being encountered
underground - where we not only discovered the expected void where the
Main Reef Leader had historically been extracted, but unexpectedly
discovered our target reef (the Main Reef) had also been extracted.
* Reconstruction of the economics and geology of the time (in particular
the width of the middling between the reefs) has rendered these composite
double voids highly predictable. The frequency and the impact on reserves
and mine economics are now not considered material, and abortive
development into them can largely be avoided.
- After much heartache and expense, the Company has settled on a
proven mining methodology:
- Long-hole mechanised stoping from reef-drives was abandoned in
September 2010 as a result of the difficulties in supporting the
- Long-hole stoping from footwall drives and crosscuts was abandoned
in June 2011 because of the dilutive effects of the long-hole
blasting percussion bringing down too much hanging wall waste.
- The Company has successfully reverted to in-stope, typical South
African hand-held drilling. Four months of steady-state production
has delivered the Company into cash-flow positive territory. This
operating profit could, and should, be applied to replacement
development in 2013, but it is not enough to fund any expansion.
- Safety concerns about working under vintage hanging wall have proven
manageable thus far, primarily because of conservative rock
engineering and the low percussive impact of this conventional
Last year, the Company`s Auditors agreed with the "going concern" status of
the Company on the basis that it had sufficient working capital to see it
through 15 - 18 months, within which time some action to guarantee further
whether it be capital raising, debt or corporate action, would be needed.
This year, the "going concern" status has been agreed on the basis of a
sustainable, cash-positive organisation, though noting that any substantial
expansion in production would require external funding.
In its 2008 Mining Right Application, the Company submitted the requisite
Social and Labour Plan ("SLP"). This SLP was based upon the 2007 founding
vision of a one million ounce per year producer. Whatever the ultimate size of
this Company, and there is indeed still huge potential, such large volumes of
gold production remain a long way off.
The South African Department of Mineral Resources ("DMR") periodically
conducts compliance audits against the initial SLP. While there are many areas
where the Company punches considerably above its current weight, it is clearly
not in a position to meet the commitments of an operation 20 times larger than
its current size. The Company has, without success, sought to open a dialogue
on agreeing some sort of progressive or proportional basis for a revised SLP.
In September 2011, the South African Minister of Mineral Resources
("Minister"), without warning or pre-conditions, withdrew the Company`s Mining
Rights. This action was successfully interdicted, subject to judicial review.
The Minister then withdrew from the judicial review and the Mining Rights were
It is expected that this turbulent process has set the scene for a more
rational engagement with the DMR.
The conventional mining that is now proving successful has been undertaken
from the development infrastucture, with its closer spacings, inherited from
the long-hole mechanised stoping layout. This is currently being changed to
the longer distances between raises and longer panel lengths more typical of
conventional mining on the Witwatersrand. This requires dramatically less on-
reef development than is currently the case and will further reduce operating
When the Company is able to demonstrate twelve months of cash positive
operations, which it should do by the end of 2012, we may be in a position to
talk credibly about the valuation gap between how the Company sees itself and
how it is currently assessed in the market.
Understandably, the market has been unwilling to accord any value to the "blue
sky" of the balance of the resource base until we are genuinely at a "concept
proven" stage. We are getting there.
Restoring value to our shareholders is the challenge now facing the Company.
This can only be done by identification and delivery of a growth plan with
attractive short-term prospects and credible long-term aspirations.
* At our present size, operating profits are expected to suffice to fund
the replacement development, which must recommence in 2013, to maintain
current production levels, and not a lot more.
* Organic growth would be a very slow process, draining the organisation of
cash, deferring the prospects of any returns to shareholders, and
possibly putting Prospecting Rights and future Mineral Rights at risk on
a use-it-or-lose-it basis.
* The organisation, in its current "de minimus" concept-proving stage, is
at the wrong end of economies of scale. For almost no increase in
overhead costs the Consolidated Main Reef ("CMR")operations could triple
production and dramatically improve the profitability. This is currently
planned for 2014, following a successful twelve-month operating campaign
at current levels, but some capital funding would be required.
* Approaching our long-suffering shareholders for further capital or
accessing the debt markets are difficult alternatives, but they will be
considered in depth in the coming months.
* The considerable change in our shareholder base, with a large-scale
replacement of institutional investors by the retail market, is a dynamic
that is not without its potential, either in terms of capital raising, or
simply in terms of closing the valuation gap. The much more sanguine
aspirations of the Company, the change in shareholder base, and the costs
and effort of maintaining a LSE Main Board listing combine to suggest
that an Alternative Investment Market ("AIM") listing may be more
appropriate. The Board believes that the dramatic reduction of risk over
the last year and the delivery of a practical ongoing production plan
make it possible to meet the regulatory requirements of such a move.
Accordingly, it is the intention to approach the shareholders as soon as
reasonably practical to request their approval of such a move.
Puno Gold Investments (Proprietary) Limited ("Puno ")
The ongoing struggle with Central Rand Gold South Africa (Proprietary)
Limited`s ("CRGSA") Broad-Based Black Economic Empowerment ("B-BBEE") partner,
Puno, continues at a pedestrian pace. A court date has been set to hear our
application to either find that our understanding of the funding mechanisms in
the CRGSA Shareholders` Agreement is correct, or to have the Court appoint an
arbitrator. This court application has proven necessary in order to overcome
Puno`s frustration of the appointment of an arbitrator by the means envisioned
in the Shareholders` Agreement.
In the meantime, Puno misses few opportunities to take its case to the "Court
of Public Opinion" in South Africa, a one-sided process that the Company has
elected not to publically engage in.
While this Company has faced the threats of AMD, composite double voids and
the establishment of an alternative mining methodology, it has shrunk to
minimal levels of staff. This has necessitated across-the-board retrenchment.
Many fine people have been retrenched, taken voluntary retrenchment packages,
or simply moved on. This has been an unfortunate and distressing process. I
extend the sympathies of the Board of Directors ("Board") to those who have
been impacted and our best wishes for success in such new direction as they
The Board has been reduced to the statutory minimum, in sympathy and as part
of the necessary cost savings, with the resignations of Messrs Nick Farr-Jones
and Jerome Brauns. Their wise counsel will be missed.
Shareholders will appreciate that with the reduction in head-count,
particularly in terms of independent directors, and financial and internal
audit staff, the organisation is stretched. Despite this, the Directors are
confident that the segregation of power and the effectiveness of internal
There is a separate section on Corporate Governance in the body of the report.
Chief Executive Officer`s Report
The 2011 financial year will be remembered as a very tough year as the Company
had to navigate its way through significant operational challenges. In March
2011, the Company announced the commencement of a strategic review as it
encountered and identified major business risks such as:
* rising Acid Mine Drainage in the Central Basin;
* the existence of composite double voids within its targeted mining areas;
* high levels of ore dilution due to the use of the long-hole stoping
As a direct result, in March 2011 the Company announced the suspension of
underground production and development, and the commencement of a strategic
review process to determine the future prospects of the Company. This far-
reaching step unfortunately required a staff redundancy process, which
ultimately resulted in 116 staff members being retrenched.
By September 2011, the Company was able to publish a new life-of-mine and
economic study on the western portion of the CMR property to a depth of
approximately 450 metres below surface. This was largely due to the clarifying
of the abovementioned business risks, coupled with the successful completion
of a three month trial on conventional hand-held stoping.
Without doubt, one of the biggest disappointments of the year was the decision
by the Minister on 26 September 2011 to cancel the Company`s New Order Mining
Right ("Mining Right"), just as the Company was starting to gain fresh
momentum based on the new mining methodology.
On 24 October 2011, the Minister announced that her decision to cancel the
Company`s Mining Right had been temporarily suspended, pending judicial
review. This enabled the Company to continue with its operations. The Minister
subsequently indicated that the South African Government ("Government") did
not wish to pursue the judicial review and the Mining Right was officially
restored to the Company, in a Court sanctioned agreement, on 22 December 2011.
My report outlines the major corporate and operational activities that took
place during the year, setting the scene for further progress in 2012, taking
into account the uncertainties that still affect the Company and its ability
to realise its potential and plan for the future.
2011 Business Risks
Acid Mine Drainage
1. The rising water table in the Central Basin as a result of Acid Mine
Drainage was a matter of major concern for the Company during 2011, leading to
the suspension of underground mining development in the second quarter of the
In July, the Company successfully tested two submersible water pumps in
Germany, capable of pumping 1,500 kilolitres of water per hour at 43 bar pump
pressure differential with a pump efficiency rate of 81.1%. These were
acquired at a cost of Euro3.5 million from an international technology
supplier, Andritz Ritz, as part of the Company`s own contribution to solving
the water problem in the Central Basin.
Throughout the year, the Company engaged with the mining industry, service
providers and the Government, around the issue of the rising water table in
the Central Basin.
Encouragingly, Trans-Caledon Tunnel Authority ("TCTA") was appointed by the
Minister of Water Affairs as the implementing agent for the proposed solution
that was presented to the Portfolio Committee on Water and Environmental
Affairs on 7 September 2011.
This proposed solution includes:
* A commitment to hold the Environmental Critical Level ("ECL") in the
Central Basin to 186 metres below surface. This represents an approximate
level of 225 metres below surface in Central Rand Gold`s mining area.
* The construction of a new high density sludge plant with a capacity of 84
million litres a day next to the South West Vertical Shaft.
* Utilisation of Central Rand Gold`s two submersible water pumps to dewater
and maintain the Central Basin.
* The transfer of treated water via pipeline to Elsburg Spruit.
* Co-disposal of sludge with DRD Gold.
* The sale of grey water, where possible.
The water inflow into the Central Basin over the last 12 months has been much
slower than anticipated. The water table rose on average by 0.36 metres per
day ("mpd") in 2011, this in comparison to a historical average of 0.5 mpd.
Encouragingly, the 2012 year to date average rate of rise remains in line with
the 2011 average. If this trend continues, the latest estimates are that ECL
will only be breached during the second quarter of 2013.
TCTA issued a single tender for all three basins and the awarding of the
contract is expected by the end of April 2012, with the construction of the
plant expected to commence immediately. Commissioning is expected to take
place in the first quarter of 2013.
The Company is in the process of finalising its agreement with TCTA, on
dewatering principles and the final contract is expected to be signed during
the second quarter of 2012.
2. Completion of composite double void study
Following the announcement in March 2011 that the Company was encountering
what appeared to be unrecorded mining voids in areas believed to not have
previously been mined, a comprehensive study was undertaken to fully determine
and understand the reason behind their occurrence, and to provide a means for
detection and prediction of future occurrences.
In mid-September 2011, the Company was able to announce that the study
confirmed that the incidence of the composite double voids was limited to very
specific areas and conditions, and that general prediction of their occurrence
would be possible.
The study showed that the development of these composite double voids appeared
to be limited to areas where the entire Main Reef, Middling and Main Reef
Leader package had been extracted as one economic package, partly as a result
of particularly thinly developed Middling. This is geologically predictable.
Importantly, the study revealed that the combined impact of composite double
voids was less than 3% of the area affected, with a resultant negligible
impact on the Main Reef Mineral Resource base. The study also showed that in
the impacted CMR leasehold area, less than 5% of the resource base between
zero and 450 metres below surface, was affected. A full report on the study is
available on the Company`s website.
3. Mine dilution
Long-hole stoping was suspended in May 2011 due to unacceptably high dilution
from the zero grade material arising from concussion causing the immediate
hanging wall of the Main Reef Leader to collapse onto the blasted reef. In
some cases, dilution rates of up to 207%, were reported.
A trial phase of conventional hand-held stoping was undertaken in selected pre-
development areas. This trial was carried out by Sekgwa Mining Services
(Proprietary) Limited ("Sekgwa Mining"). The objective of this trial was to
* the reef coud be safely stoped using conventional means;
* the methodology could effectively control dilution from the hanging wall;
* the methodology is commercially viable.
By the end of September 2011, all three objectives had been achieved and the
Company decided to adopt this stoping methodology for its underground
In addition to testing the practicalities of hand-held stoping, the Company
engaged the services of specialist mining engineering consultancy, MineQuest
Consult (Proprietary) Limited ("MineQuest"), to develop a life-of-mine
economic study on the western portion of the CMR property to a depth of
approximately 450 metres below surface. MineQuest`s study was based on a
hybrid mining style combining conventional hand-held stoping together with
mechanised development and tramming.
Significantly, MineQuest`s study concluded that a 30,000 - 40,000 ounces a
year operation is viable, with a life-of-mine of approximately 12 years. The
Company believes that, subject to further funding, the new conventional mining
method is viable and repeatable across its tenement areas. There is 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.
4. Mining Right
On 5 August 2011, the Company received notification from the DMR that it was
reviewing the Company`s New Order Mining Right ("Mining Right") that was
granted in August 2008. The Company was advised that it needed to make a
presentation - supported by accompanying documentation - essentially outlining
why its Mining Right should not be cancelled. This presentation - with
supporting documentation - was made to the DMR on 24 August 2011. No response
was received from the DMR following this presentation. On 26 September 2011,
the Company received a Section 47 notice, advising that its Mining Right had
been cancelled due to the Company not fulfilling its Social and Labour Plan
On 24 October 2011, the Minister announced that her decision to cancel the
Company`s Mining Right had been temporarily suspended, pending judicial
review. This enabled the Company to resume its normal mining activities and
It is important to note that the Company sent a detailed letter to the
Minister on 9 September 2011, outlining why it had only spent R18.8 million on
its Social and Labour Plan over a two year period, compared to the R32.2
million it had committed to spending. The letter - which was also published on
the Company`s website - pointed out that due largely to the rising water table
in the Central Basin, the accessible resource base had diminished to 431,000
ounces from the 3.25 million ounces on which the original Social and Labour
Plan was based. This had caused the Company to amend its mining strategy and
methodology and sharply reduce its staff requirements and human resource
development targets. It also argued that the Company`s purchase of two
submersible water pumps, at an approximate cost of R35 million, to control the
rising water table in the Central Basin, should be taken into consideration
and be offset against the R14 million investment shortfall in the Social and
The letter comprehensively outlined the challenges the Company has faced over
the past few years and put forward a strong argument for why the Mining Right
should be fully restored.
On 12 December 2011, it was widely reported in the media that the DMR would
not be opposing the Company`s High Court application to set aside the
cancellation of the Mining Right. The Company`s Mining Right was officially
restored in the High Court on 22 December 2011 by a Consent Order, setting
aside the administrative decision announced by the Minister on 22 September
2011. This was an excellent way for the Company to end the year, removing a
major stumbling block in the way of moving forward with plans to realise the
Exploration and geological update
Resources and reserves
During February 2012, Resource evaluation studies on the Main Reef, undertaken
by Dr Carina Lemmer (an Independent Competent Person), incorporated additional
sampling information obtained through the current surface and underground
mining. This exercise has allowed for the reclassification and upgrade of
approximately 160,000 ounces contained within the area into the SAMREC
compliant Measured Resource category.
Main Measured Resources Indicated Inferred Resources
Reef CMR Resources
Depth Tonnes Grad Conte Tonne Grad Conte Tonne Grad Content
(mbs) (milli e nt s e nt s e (Moz)
on) (mill (mill
(g/t (Moz) ion) (g/t (Moz) ion) (g/t
) ) )
30 - 100 0.34 3.19 0.03 1.12 3.14 0.11
100 - 1.13 3.69 0.13 4.61 4.18 0.62
450 - 3.25 5.21 0.54
900 - 2.92 6.29 0.59 0.27 6.21 0.06
1,500 - 2.68 7.57 0.65 0.25 7.97 0.07
Total 1.47 0.16 14.58 2.51 0.52 0.13
Average 3.57 5.38 7.07
* Totals and averages are based on additional decimal points.
This represents an increase in Measured and Indicated Resources of
approximately 3%. Whilst the quantum of increase is relatively minor, the
confidence increase between Measured Resource and Indicated is substantial.
This confidence increase is largely due to additional verification sampling
undertaken during the course of current operations.
It is worth noting that the Resource now excludes material shallower than 30
metres (which has been reclassified as Exploration Target Material and is
currently being exploited through open pit mining). This updated Mineral
Resource also takes into account the Resource depletion arising from the
Company`s underground mining activities over the past 24 months.
The Company`s Resources in other areas remain unchanged. This upgrade only
impacts the Main Reef in the CMR area. The tabulation below details a
comparison of the impact of this new resource upgrade on the entire Resource
base. Rounding from the original Resource reports has created minor
inconsistencies with respect to grade and content.
Area February 2012 Resource Statement
Measured Resource Indicated Inferred
Tonn Grad Conte Tonne Grad Cont Tonn Grad Cont
es e nt s e ent es e ent
(mil (g/t (Oz) (mill (g/t (Oz) (mil (g/t (Oz)
lion ) ion) ) lion )
CMR Main 1.5 3.6 0.17 10.3 5.2 1.73 1.1 10.3 0.37
S Reef & Main
h Reef Leader
Crown Main 5.8 5.7 1.09 3.1 7.9 0.79
Reef & Main
Village/ 1.8 6.6 0.39 0.2 13.6 0.10
Main Reef &
City Deep 2.9 6.8 0.61 2.4 6.9 0.54
Main Reef &
Simmer and 1.5 8.8 0.43 0.2 8.2 0.04
CMR 2.6 3.7 0.31 0.6 3.7 0.07
CMR and 3.7 3.8 0.44 4.3 3.7 0.51
Dee Main Reef, 58.6 9.6 18.1 45.7 7.3 10.7
per Main Reef 5 5
n South Reef,
bel White Reef
Total 1.5 3.6 0.17 87.2 8.3 23.1 57.6 7.1 13.1
Area December 2010 Resource Statement
Indicated Resource Inferred
Tonnes Grad Cont Tonn Grad Cont
(million) e ent es e ent
(g/t (Oz) (mil (g/t (Oz)
) lion )
CMR Main 10.5 5.5 1.84 1.6 9.5 0.48
S Reef & Main
h Reef Leader
Crown Main 5.8 5.9 1.10 3.1 8.0 0.81
Reef & Main
Village/ 1.8 6.7 0.39 0.2 16.5 0.11
Main Reef &
City Deep 2.9 6.8 0.63 2.5 6.8 0.54
Main Reef &
Simmer and 1.5 8.8 0.43 0.2 8.3 0.04
CMR 2.6 3.7 0.31 0.6 3.8 0.07
CMR and 3.6 3.8 0.44 4.3 3.9 0.42
Dee Main Reef, 58.5 9.7 18.2 46.6 7.3 10.8
per Main Reef 2 9
n South Reef,
bel White Reef
Total 87.2 8.3 23.3 59.1 7.0 13.3
* Totals are based on additional decimal points. Rounding from the original
reports has created minor inconsistencies with respect to Grade and metal
NOTE: The information in this statement relating to Mineral Resources and
geology has been reviewed and approved by Mr Keith Matier, BSc (Hons), GDE,
PrSci Nat, who is a Competent Person in terms of the SAMREC code. Mr Matier is
the Geology Manager of Central Rand Gold South Africa (Proprietary) Limited
("CRGSA") and has over 17 years` experience in exploration, mineral resource
management and mineral evaluation.
The decision to cease making use of the mechanised long-hole stoping mining
technique has required that the Company`s Mineral Reserve be revisited.
Scoping studies and trial mining using conventional hand-held mining
techniques have been completed and appear robust and economic. The Company is
currently in the process of updating the Mineral Reserves in line with this
new mining methodology and an updated Reserve statement is expected to be
completed during the first half of 2012.
Exploration through systematic mechanical trenching and geological mapping and
sampling continued throughout 2011, resulting in the identification and
delineation of further open pit "Exploration Target" areas within the Mining
Right. The table below details the Exploration Target Inventory as at 31
December 2011. The Exploration Target base has been further classified on the
basis of proximity to the gold plant, and now also includes an estimate of
clean-up residue from the current stockpile areas and spillage areas in the
vicinity of the decommissioned Bateman plant.
CRG Exploration Target Summary
Mining Area Reef Exploration Target Material
SLOTS 8 and 9 (Areas within 3km of Plant)
Central MR&MRL 2.2-3.1g/t 4,600-12,600 t
New Unified MR&MRL 2.4-2.6g/t 10,000-26,000 t
Spenser MR&MRL 3.0-3.1g/t 10,000-25,000 t
ROM Pad Cleanup Various 1.6-3.2g/t 20,000-50,000 t
SLOTS 5 and 7 (Areas more than 3km from Plant)
Slot 5 A White 2.9-3.1g/t 27,000-48,000 t
Slot 5 B,C,D White 1.5-1.9g/t 17,000-33,000 t
Slot 7 White 2.1-3.2g/t 87,000-200,000 t
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. 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.
Further potential not yet tested, and additional to the Exploration Target
schedule above, has been identified in the Slot 9 area to the immediate west
of the current New Unified operation. Initial exploration has recently been
initiated and, if successful, surface operations could continue substantially
Central Rand Gold has had a proud safety record since its inception. However,
safety was more of a challenge in 2011 than in the past, as we suffered five
lost-time injuries of which three came from underground operations and two
from the metallurgical plant.
We have continued to focus on improving our safety standards and awareness
through safety programmes, which include daily and weekly safety meetings
across the operations and safety awareness throughout the mine. The Company
continues to treat safety as a top priority.
The following table shows overall safety statistics for 2011 (a more
comprehensive safety overview is contained in the Sustainable Development
section of this report):
Type of injury 2011 2010
Dressing cases 7 20
Lost-time injuries 5 5
Incidents 58 97
The following table shows key mining statistics for 2011 comparing actual
statistics and those achieved in 2010.
2011 2010 Difference
Activity Metres Grade Metres (m) Grade Metres (m) Grade
(m) g/t Tons (t) g/t Tons (t) g/t
Decline 101.3 858.1 (756.8)
Waste 861.4 1,266.0 (404.6)
Footwall 566.2 858.9 (292.7)
Reef 11.4 1.6 355.0 1.6 (343.6) -
Total (m) 1,540.3 3,338.0 (1,797.7)
Stoping (t) 61,391 2.8 6,073 2.6 55,318 +0.2
Reef 23,979 2.8 33,851 (9,872)
Surface 203,993 3.9 155,435 3.2 48,558 +0.7
Total Tons 289,363 195,359 94,004
As mentioned in the March 2011 announcement, the Company commenced the process
of ceasing all underground development and production. This was motivated by
the then unexplained observation of composite double voids and the high
dilution rates experienced with long-hole stoping. In July 2011, the Company
commenced with a three month trial of its conventional hand-held stoping
methodology, which proved very successful.
Conventional stoping is done by means of a series of raises and down dipping
panels. This is to allow the miners to always work from supported areas. The
ore is pulled through the raises to the draw-points below with scraper
winches, and loaded from the draw points into the Articulated Dump Truck
("ADT") by means of a 14 tonne Load Haul Dump ("LHD") truck. Then the ore is
carted to the stockpile on surface.
Our stope support system is a combination of 180 mm to 200 mm mine-poles
installed 1.5 metre apart on dip and strike and a line of 1.8 metre resin-
bolts between each line, also installed at 1.5 metre apart on dip and strike.
This has proven to be effective at the current depth of less than 200 vertical
metres from surface to effectively hold the hanging-wall.
Production from conventional stoping amounted to 21,707 tonnes, for the last
six months of the year, which was in line with the Company`s planned
production targets. The production target for 2012 will be to increase monthly
underground production to 12,000 tonnes per month, by the third quarter of
2012. Current underground development has opened up approximately 270,000
tonnes of stoping area, which has provided the mining operations with
approximately 12 to 14 months of production without any further underground
mine development being required.
Production from slot mining pits:
Pit Tonnes Grade
New Unified 102,840 4.15
Spencer 58,970 3.94
Central 42,183 3.36
Total 203,993 3.93
Surface mining performed well during 2011 with an average in-situ (undiluted)
grade of 3.9 grams per tonne and an average stripping ratio of 1:9 from
January to December 2011, which was below the targeted ratio of 1:11.
As at 31 December 2011, between 45,000 tonnes and 114,000 tonnes of material
remained in the immediate Slot 8 surface mining area. This material has been
trenched, mapped, sampled and assayed for gold, and is estimated to run at
grades of between 2.2 grams per tonne and 3.0 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 material will continue to be excavated, blended and processed in the
Company`s Carbon-in-Pulp ("CIP") gold recovery plant, with a view to
determining mined grades and recoveries, and generating income for the
Included in this material is clean-up residue from the current ore stockpile
and spillage areas in the vicinity of the decommissioned Bateman concentrator.
Defined Exploration Target material lying in close proximity to the process
plant is expected to be exhausted by the end of May 2012, and the standing
stockpiles of surface material are likely to be fully depleted by the end of
June 2012. Exploration is ongoing in areas close to the plant and may result
in the discovery of additional Exploration Target material. During 2011, some
203,993 reef tonnes were mined from various pits at Slot 8 and Slot 9. The
stripping ratio of 1:9 was achieved against the planned stripping ratio of
Internal ore processing
The ore processing plant saw a number of significant changes during 2011. In
July 2011, a decision was made to turn off the Bateman concentrator plant and
process ore exclusively through the CIP circuit. This was essentially an
informed economic decision, where the relatively high unit operating cost for
the Bateman was compounded by the concentrator`s relatively depressed
recoveries, and suboptimal operational availability, brought about by heavy
wear on the Vertical Shaft Impactor ("VSI") crusher, through crushing of
siliceous underground ore.
Plant feedstock during the first six months of 2011 was a blend of underground
sulphide ore (15% to 30%) and surface oxide ore (70% to 85%). A total tonnage
of 98,578 tonnes was processed through the combined Bateman/CIP configuration
between January and June 2011, at a built up feed grade of 2.47 g/t.
The latter six months of 2011 saw only the softer surface oxide material being
processed solely through the CIP circuit. Production for the period July to
December 2011 totalled 65,157 tonnes at a built up grade of 2.26g/t. It should
be noted that there was no production during the entire month of October 2011
due to the Section 54 suspension of operations. As predicted, metallurgical
recoveries improved substantially from 84% to 95%. A similar dramatic increase
in overall availability was also observed.
Jan to June July to Dec 2011
Tonnes processed 98,578 65,157 163,735
Built up head- 2.47 2.26 2.39
Residue grade 0.39 0.11 0.28
Fine gold 6,376 4,597 10,973
Recovery 84% 95% 89%
Availability 81% 92% 86%
* Schedule of ore processed at the Company`s metallurgical plant.
Outsourced ore processing
During 2011, the Company tested a number of tolling operations and scenarios
at the neighbouring gold producer, Mintails Limited ("Mintails"). During March
and April 2011, approximately 11,700 tonnes of dry oxide ore, at an average
grade of 2.7g/t, was treated at Mintails` Mogale facility.
During July and August 2011, a further tolling trial of gold bearing residue
tailings material, similar to that generated during the initial 2008 and 2009
trial mining periods, was undertaken. Approximately 32,000 tonnes of this sand
material, running at an average grade of 1.2g/t, was again trucked to the
Mogale facility for toll processing.
The decision to suspend the Bateman circuit resulted in the accrual and non-
depletion of a substantial stockpile of underground sulphide ore. Much of this
ore was sourced from the highly dilutive mechanised operation from the early
part of 2011. As a means of generating additional income, a third toll trial,
based on underground sulphide material, was initiated in September 2011. By
the end of December 2011, approximately 21,000 tonnes of sulphide ore (mainly
diluted long-hole stoped ore) running at an average grade of 1.9g/t, had been
dispatched to Mintails. With the bulk of the lower grade diluted stockpiles
now monetised, tolling focus will shift to treating the high grade ore
currently being mined through less dilutive conventional means.
Jan to June July to December 2011
Oxide Tailings Sulphide
Dry tonnes 11,744 32,133 21,076 64,953
Delivered 2.66 1.15 1.93 1.68
Fine gold 1,004 1,191 1,308 3,503
* Schedule of tonnage processed at Mintails.
The CIP plant is currently operating at full capacity, treating immediately
available oxide ore sourced from open pits, stockpile pads and other surface
sources. The Mintails sulphide tolling arrangement is envisaged to continue
for as long as sulphide material excess to the existing internal milling and
leaching capacity is mined from underground operations.
In 2011 it was pleasing to report that the Company increased gold output to
14,856 ounces from 9,321 ounces of gold during 2010.
The loss for the 2011 financial year was reduced by 78.0% to US$16.1 million
(1.01 cents loss per share) against the prior year`s loss of US$72.1 million
(4.51 cents loss per share). This reduced loss is largely attributed to the
Increased gold sales
There was a 58.7% higher gold sales volume at 14,793 ounces (2010: 9,321
ounces) predominantly from surface pits with better grades, improved plant
availability, higher plant recovery and a stronger average realised Rand
equivalent gold price. Gold production capacity was also augmented through
toll treatment of excess mine production at Mintails.
Increased sundry income
This is mainly due to profit on the sale of the Gekko concentration plant, a
redundant drill rig, miscellaneous fixed assets and surplus waste rock sales.
Reduced operating costs
Surface mining cash operating costs reduced by 26.0% to an average of US$1,115
per ounce (2010: US$1,519 per ounce) due to the discovery of additional
surface materials with better strip ratios, better grades, resized employee
headcount, metallurgical process optimisation, and renegotiated material and
service contract rates.
Underground mining, head office and mine support
As was reported in the 2010 Annual Report and the Operational Update of 29
March 2011, due to the uncertainty around the composite double voids, the
rising water table and the investigation of a viable alternative mining
method, all underground mine development and long-hole stoping was suspended
in May 2011. This triggered uncertainty on future cash flows resulting in an
impairment write-off of US$44.4 million in 2010. Subsequent to this, a series
of cost cutting and turnaround programmes were initiated including the
* Replacement of Australian-based mechanised mining specialist, Australian
Contract Mining ("ACM"), with South-African based contractor, Sekgwa
Mining, to conduct conventional mining at much reduced costs and lower
* Resizing through the retrenchment of 116 direct employees, voluntary
resignations and freezing of vacancies, reducing total direct headcount
from 195 (excluding Non-executive Directors) to 92 (excluding Non-
* Renegotiated and reduced key material and services contract rates.
* Closure of the Rand Leases office and relocation of head office and mine
support to the mine site.
* Process improvements to optimise and reduce material consumption e.g.
diesel fuel and chemicals.
Cash and cash equivalents
The cash and cash equivalent balance is reported at US$5.4 million as at 31
December 2011 (2010: US$14.6 million). The lower cash balance is a result of
cash out flows including the investment the Company made in the testing of
different mining methods; optimisation of processing; underground development
up to the end of June 2011; retrenchment packages; foreign currency losses on
translation of Rand cash balances; ore stockpile build-up; and the suspension
of the Mining Right during October 2011. However, these were mitigated by:
* proceeds from the sale of the Gekko plant, mobile mine equipment and
* restructuring of the rehabilitation guarantee from a cash deposit
guarantee into an insurance rehabilitation guarantee;
* gold sales from surface materials;
* reduced contract rates for key material and service contracts; and
* recovery of overdue value-added tax ("VAT") refunds.
Having negotiated a very challenging period in 2011 when the Company`s Mining
Right was under threat, it is extremely pleasing to be operating in a much
more certain environment in 2012. The focus for the Company during 2012 will
* stabilise its current mining operation based on the new mining
methodology, building up production to 12,000 tonnes per month by the end
of the year. The Company estimates that it has sufficient underground ore
available to ensure that decline development only needs to re-commence in
* calculate and report a new reserve base taking into account its new
mining methodology. This is expected to be completed by mid-year;
* complete a mine scoping study for the Crown Mining Right area to evaluate
the financial viability of the area;
* explore opportunities with other interested stakeholders and extract
value from its extensive Mining Right and prospecting areas; and
* submit, and receive approval for, the revised Social Labour Plan and Mine
Work Programme from the DMR by the end of June 2012.
Thank you to everyone who has contributed to the Company successfully
negotiating another challenging year. All stakeholders have played, and
continue to play, a valuable role in Central Rand Gold`s development - this
includes Directors, management, staff, suppliers, shareholders and community
Johan du Toit
Chief Executive Officer
Statements of Financial Position as at 31 December 2011
Property, plant and equipment 3,460 10,022
Intangible assets - -
Security deposits and guarantees 273 335
Environmental guarantee investment 4,058 6,163
Loans receivable 8,956 9,830
Security deposits and guarantees 581 4,069
Prepayments and other receivables 5,227 6,626
Inventories 2,306 207
Cash and cash equivalents 5,376 14,624
Non-current assets held-for-sale 2,584 4,074
TOTAL ASSETS 32,821 55,950
Attributable to equity holders of the
Share capital 25,604 25,604
Share premium 213,377 213,377
Share-based compensation reserve 28,018 27,925
Treasury shares (6) (6)
Foreign currency translation reserve (26,955)
Accumulated losses (210,897)
Non-controlling interest - -
TOTAL EQUITY 11,679 29,048
Environmental rehabilitation and other 6,038 6,474
Loan payable 8,956 9,830
Operating lease liability - 4
Borrowings - -
Trade and other payables 4,382 8,884
Environmental rehabilitation and other - -
Taxation payable 1,755 1,704
Operating lease liability 11 -
Borrowings - 6
TOTAL LIABILITIES 21,142 26,902
TOTAL EQUITY AND LIABILITIES 32,821 55,950
Statements of Financial Performance for the year ended 31 December 2011
Other income and gains 25,055 11,657
Employee benefits expense (7,851) (10,875)
Directors` emoluments (1,078) (1,237)
Depreciation and amortisation (3,416) (2,524)
Inventory write-down (332) (263)
Impairment of assets (470) (44,455)
Operating lease expense (533) (1,045)
Surface mining costs (19,266) (17,099)
Operational expenses (2,332) (718)
Other expenses (4,187) (6,554)
Operating loss (14,410) (73,113)
Interest receivable 1,443 1,512
Finance costs (1,072) (1,015)
Foreign exchange transaction (2,056) 1,384
Loss before income tax (16,095) (71,232)
Income tax expense - (840)
Loss for the year (16,095) (72,072)
Loss is attributable to:
Non-controlling interest - -
Equity holders of the parent (16,095) (72,072)
Loss per share for loss attributable to the equity holders during the
year (expressed in US cents per share)
Basic loss per share (1.01) (4.51)
Diluted loss per share (1.01) (4.51)
Statements of Comprehensive Income for the year ended 31 December 2011
Loss for the year (72,072)
Other comprehensive (loss)/income:
Exchange differences on translating (1,367) 1,445
Income tax relating to components of - -
other comprehensive income
Other comprehensive (loss)/income for (1,367) 1,445
the period, net of tax
Total comprehensive loss for the period (70,627)
Total comprehensive loss is attributable
Non-controlling interest - -
Equity holders of the parent (70,627)
Statements of Changes in Equity for the year ended 31 December 2011
Attributable to equity holders of the Parent
Group Ordina Share Shar Tre Forei Accu To Non-Total
ry Premium e- asu gn mula ta Con Equity
Share Base ry Curre ted l tro
Capita d Sha ncy Loss lli
l Comp res Trans es ng
ensa latio Int
tion n ere
Rese Reser st
US$`00 US$`000 US$` US$ US$`0 US$` US US$ US$`000
0 000 `00 00 000 $` `00
0 00 0
Balance at - 56,684
31 December 5,023 191,406 27,4 (2) (28,4 (138 56
2009 82 00) ,825 ,6
e income for
Loss for the - - - - - (7 - (72,072)
year (72, 2,
Foreign - - - - - - 1,445
currency 1,445 1,
Capital 20,581 21,971 - - 42 42,552
Share-based - - - - - 439
payments: 443 (4) 43
Balance at - 29,048
31 December 25,604 213,377 27,9 (6) (26,9 (210 29
2010 25 55) ,897 ,0
e income for
Loss for the - - - - - (16, (1 - (16,095)
year 095) 6,
Foreign - - - - - (1 - (1,367)
currency (1,36 ,3
adjustments 7) 67
Share-based - - 93 - - - 93 - 93
Balance at 213,377 28,0 (226 11 - 11,679
31 December 25,604 18 (6) (28,3 ,992 ,6
2011 22) ) 79
Statements of Cash Flow for the year ended 31 December 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax
Adjusted for :
Depreciation and amortisation 2,524
Bad debts written off - 11
Employment benefit expenditure (Share-based 93 443
(Profit)/loss on disposal and scrapping of 24
property, plant and equipment (991)
Impairment of inventory 332 578
Impairment of assets 470
Net loss/(gain) on foreign exchange
Increase/(decrease) in operating lease 7 (47)
Sundry income (36)
Finance costs 1,015
Changes in working capital
Decrease/(increase) in prepayments and other
receivables 4,887 (1,354)
(Increase)/decrease in inventory 1,367
(Decrease)/increase in trade and other 1,264
Increase in provisions 812 3,461
Cash flows used in operations
Interest received 395 513
Finance costs (24) (16)
Sundry income 581 -
Net cash used in operating activities (11,87 (19,926
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant & equipment (2,387 (20,595
Proceeds from disposal of property, plant & 471
Decrease/(increase) in security deposits 1,070 (4,251)
Net cash used in investing activities (24,375
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (6) (33)
Net proceeds from issue of share capital -
Net cash from financing activities (6)
Net decrease in cash and cash equivalents (8,442 (1,782)
Cash and cash equivalents at 1 January
Effects of exchange rate fluctuations on cash 507
Cash and cash equivalents at 31 December
Basis of preparation and general information
1. General information
These are the non-statutory financial statements, extracted from the Group
annual financial statements for the year ended 31 December 2011.
Central Rand Gold Limited ("Central Rand Gold") is a Guernsey incorporated
company and it is also registered in South Africa as an external company. One
of its subsidiaries, Central Rand Gold (Netherland Antilles) N.V. ("CRGNV"),
was incorporated in the Netherlands Antilles. Central Rand Gold`s operating
subsidiary is Central Rand Gold South Africa ("CRGSA"). Central Rand Gold has
a primary listing on the London Stock Exchange ("LSE") and a secondary listing
on JSE Limited ("JSE").
Legally, Central Rand Gold complies with the company laws of its place of
incorporation being Guernsey and the company laws of the place of its external
registration being South Africa. One of its subsidiaries, CRGNV, is
incorporated in the Netherlands Antilles, therefore the Group is also impacted
by the company laws of the Netherlands Antilles.
The Group`s annual financial statements for the year ended 31 December 2011
were approved for issue on 30 March 2012. The auditor has issued his opinion
on the Group`s financial statements for the year ended 31 December 2011 which
is unqualified but does contain an emphasis of matter paragraph in respect of
the matters referred to under note 2 `Going concern` and is available for
inspection at the Company`s registered address.
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is not modified, we
have considered the adequacy of the disclosures set out in note 1.1 to the
financial statements concerning the Group`s ability to continue as a going
concern which depends, in particular, upon a satisfactory outcome of the
rising water table issue, and the availability of funding, which is required
to be able to restart mine development operations. These factors, together
with the other matters explained in note 1.1, indicate the existence of
material uncertainties that may cast significant doubt on the Group`s ability
to continue as a going concern. The financial statements do not include the
adjustments that would result if the Group was unable to continue as a going
2. Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards and Interpretations (collectively
"IFRS") issued by the International Accounting Standards Board ("IASB") as
adopted by the European Union ("EU").
The Directors have prepared the financial statements on the going concern
basis having considered the current operations, the current funding position
and the projected funding requirements of the business for at least 12 months
from the date of approval of the financial statements as detailed below.
In March 2011, the Group announced the results of its operational and
strategic review which considered the challenges facing the Group. Since then
significant progress has been made on many of the problems facing the Group:
- Following the cancellation of the Group`s New Order Mining Right in
September 2011, the decision to cancel was temporarily suspended in October
2011 and the Group`s Mining Rights were officially restored in December 2011.
- A double void study was completed that confirmed that the incidence of
composite double voids was limited to specific areas and conditions and that
general prediction of their occurrence would be possible. The study also
revealed that the combined impact of double voids would not have a material
effect on the Main Reef Mineral Resource base.
- As a result of the high dilution resulting from the collapse of the hanging
wall of the Main Reef Leader, long-hole stoping and mechanical mining were
suspended. Since then a proven, conventional mining method has been adopted
with four months of steady-state, cash positive production.
- The Group has also scaled back its head count to minimal levels of staff to
reflect the current levels of operation.
While significant progress has been made in stabilising the operations,
challenges remain as detailed below.
Rising water table
The water table in the Central Rand Basin is rising. It is imperative that the
water table is kept 250 metres below surface for the mine to retain access to
its reserves and resources and hence be able to reach full sustainable
production. A proposed solution to the Acid Mine Drainage ("AMD") problem was
presented to the Portfolio Committee on Water and Environmental Affairs on 7
September 2011 and Trans Caledon Tunnel Authority was appointed on that date
as implementing agent by the Minister of Water Affairs. While the Directors
remain confident that the South African Government will commit in time to
prevent AMD reaching the surface, there remains uncertainty over the timing of
the implementation of the proposed solution.
If the rising water table problem is resolved, the Group will require further
funding to develop the mine and gain access to the underground ore (see
Current and projected funding requirements
At 31 December 2011, the Group had cash of US$5.4 million. At 29 February
2012, the Group had cash of US$5.8 million, the increase resulting from
continued cash positive conventional mining in the first two months of 2012,
(albeit without any underground development of the mine).
The Directors have prepared cash flow projections until 2020 that reflect the
current mine plan adopted by the Directors. These projections show that the
Group has sufficient funding for at least the next 12 months from the date of
approval of the financial statements and hence the Directors have prepared the
financial statements on a going concern basis.
The current mining activities are forecast to keep cash levels broadly flat
over the next 18 months by continuing to process surface ore and mining the
currently accessible underground ore. The current plan assumes the resolution
of the rising water table problem and so retaining full access to the reserves
and resources. In order to develop the mine to gain access to the underground
ore and increase production beyond what is achievable over the next 18 months,
further funding would be required in the last quarter of 2013. However, the
timing of the resolution of the water table problem and the timing of
fundraising will determine whether the Group is able to follow the current
plan beyond the last quarter of 2013.
In addition, the risk inherent in any early-stage mining operation will
continue to apply to the Group, in particular, the cash flow projections
prepared by the Directors are critically dependent on key assumptions such as
the gold price, exchange rate, mining production and the metallurgical
recovery and production rates.
During 2011, the Group made considerable progress in resolving the issues that
led to the strategic review in March 2011. The Directors have now stabilised
the operations. The stabilising of the operations is an essential part to
getting the business ready for a potential capital raise in the future and to
achieving long-term sustainable production. Nevertheless, the Group remains
exposed to external factors which could disrupt the business. The continued
uncertainty around the timing of the resolution of the rising water table
problem, together with the need for additional fund raising required by the
current mine plan in the last quarter of 2013, are material uncertainties that
may cast significant doubt on the Group`s ability to continue as a going
concern and it may therefore be unable to realise its assets and discharge its
liabilities in the normal course of business.
Nevertheless, after taking account of the Group`s funding position and its
cash flow projections and having considered the following:
- the risks and uncertainties associated with these projections; and
- the current trading position which has not provided the Directors with any
evidence that their assumptions for the next 18 months are not achievable.
The Directors have a realistic expectation that the Group has adequate
resources to continue in operational existence for at least 12 months from the
date of approval of these financial statements. For these reasons, they
continue to prepare the financial statements on a going concern basis. These
financial statements do not include any adjustments that would result from the
going concern basis of preparation being inappropriate.
3. Accounting policies
The accounting policies have been consistently applied to all years presented.
(a) New and amended standards adopted by the Group
The Group has adopted the following new and amended IFRSs as from 1 January
IFRS 3: Business combinations
From 1 January 2011, the Group has applied IFRS 3 in accounting for business
combinations. The amendment lists the transition requirements for contingent
consideration from a business combination that occurred before 1 July 2010.
The amendment also describes the measurement of non-controlling interests and
also discusses unreplaced and voluntarily replaced share-based payment awards.
IFRS 7: Financial instruments: Disclosures
From 1 January 2011, the Group has applied IFRS 7 in accounting for financial
instrument disclosures. The amendments add an explicit statement that
qualitative disclosure should be made in the contact of the quantitative
disclosures to better enable users to evaluate an entity`s exposure to risks
arising from financial instruments. In addition, existing disclosure
requirements were amended and removed.
IAS 1: Presentation of financial statements
From 1 January 2011, the Group has applied IAS 1 in accounting for
presentation of financial statements. The amendments clarify that
disaggregation of changes in each component of equity arising from
transactions recognised in other comprehensive income is also required to be
presented, but may be presented either in the statement of changes in equity
or in the notes.
IAS 24: Related-party disclosure
From 1 January 2011, the Group has applied IAS 24 in accounting for related-
party disclosures. The revised standard amends the definition of a related-
IAS 34: Interim financial reporting
From 1 January 2011, the Group has applied IAS 34 in accounting for interim
financial reporting. The amendments add examples to the list of events or
transactions that require disclosure under IAS 34 and remove references to
materiality in IAS 34 that describe other minimum disclosures.
(b) Standards, amendments and interpretations to existing standards that are
not yet effective and have not been early adopted by the Group
A number of standards and amendments to existing standards have been published
and are mandatory for the Group`s accounting periods beginning on or after 1
January 2012 or later periods, but the Group has not early adopted them.
IFRS 7: Financial instruments: Disclosures - transfers of financial assets
The amendment to IFRS 7 will be adopted by Central Rand Gold for the first
time for its financial reporting period ending 31 December 2012.
In terms of the amendment, additional disclosure will be provided regarding
transfers of financial assets that are:
(i)not recognised in their entirety; and
(ii) derecognised in their entirety but for which Central Rand Gold retains
IFRS 9: Financial instruments: Classification and measurement
The amendment to IFRS 9 is expected to be adopted by Central Rand Gold for the
first time for its financial reporting period ending 31 December 2013. The
standard will be applied retrospectively, subject to transitional provisions.
The standard has not yet been endorsed by the EU.
IFRS 9 addresses the initial measurement and classification of financial
assets and will replace the relevant sections of IAS 39. Under IFRS 9 there
are two options in respect of classification of financial assets, namely,
financial assets measured at amortised cost or at fair value. Financial assets
are measured at amortised cost when the business model is to hold assets in
order to collect contractual cash flows and when they give rise to cash flows
that are solely payments of principal and interest on the principal
outstanding. All other financial assets are measured at fair value.
Additions to IFRS 9
The additions to IFRS 9 are expected to be adopted by Central Rand Gold for
the first time for its financial reporting period ending 31 December 2015.The
standard will be applied retrospectively, subject to transitional provisions.
The additions to IFRS 9 have not yet been endorsed by the EU.
Under IFRS 9 (2010), the classification and measurement requirements of
financial liabilities are substantially the same as per IAS 39, barring the
following two aspects:
(i)Fair value changes for financial liabilities (other than financial
guarantees and loan commitments) designated at fair value through profit or
loss, attributable to the changes in the credit risk of the liability, will be
presented in other comprehensive income. The remaining change is recognised in
profit and loss. However, if the requirement creates or enlarges an accounting
mismatch in profit or loss, then the whole fair value change is presented in
profit or loss. The determination as to whether such presentation would create
or enlarge an accounting mismatch is made on initial recognition and is not
(ii) Under IFRS 9 (2010), derivative liabilities that are linked to and must
be settled by delivery of an unquoted equity instrument whose fair value
cannot be reliably measured, are measured at fair value.
IFRS 9 (2010) incorporates the guidance in IAS 39 dealing with fair value
IFRS 10: Consolidated financial statements
The amendment to IFRS 10 will be adopted by Central Rand Gold for the first
time for its financial reporting period ending 31 December 2013.
Retrospective application is generally required in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors. However, an
entity is not required to make adjustments to the accounting for its
involvement with entities that were previously consolidated and continue to be
consolidated, or entities that were previously unconsolidated and continue not
to be consolidated.
IFRS 10 prescribes modified accounting on its first application in the
following circumstances:(i) An entity consolidates an entity not previously
(ii) An entity no longer consolidates an entity that was previously
(iii) In relation to certain amendments to IAS 27 made in 2008 that have been
carried forward into IFRS 10.
IFRS 12: Disclosure of interests in other entities
IFRS 12 will be adopted by Central Rand Gold for the first time for its
financial reporting period ending 31 December 2013.
IFRS 12 requires the disclosure of information that enables users of financial
statements to evaluate:
(i)the nature of, and risks associated with, its interests in other entities;
(ii) the effects of those interests on its financial position, financial
performance and cash flows.
IFRS 13: Fair value measurement
IFRS 13 will be adopted by Central Rand Gold for the first time for its
financial reporting period ending 31 December 2013.
IFRS 13 seeks to increase consistency and comparability in fair value
measurements and related disclosures through a `fair value hierarchy`. The
hierarchy categorises the inputs used in valuation techniques into three
levels. The hierarchy gives the highest priority to (unadjusted) quoted prices
in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs.
IAS 1: Presentation of financial statements
The amendments to IAS 1 are expected to be adopted by Central Rand Gold for
the first time for its financial reporting period ending 31 December 2013.
The amendments revise the way other comprehensive income is presented.
IAS 12: Income taxes
The amendment to IAS 12 is expected to be adopted by Central Rand Gold for the
first time for its financial reporting period ending 31 December 2012.
The amendment provides a solution to whether an entity expects to recover the
carrying amount of the asset through use or sale by introducing a presumption
that recovery of the carrying amount will, normally, be through sale.
IAS 19: Employee benefits
The amendments to IAS 12 are expected to be adopted by Central Rand Gold for
the first time for its financial reporting period ending 31 December 2013.
(i)require recognition of changes in the net defined benefit liability (asset)
including immediate recognition of defined benefit cost, disaggregation of
defined benefit cost into components, recognition of remeasurements in other
comprehensive income, plan amendments, curtailments and settlements;
(ii) introduce enhanced disclosures about defined benefit plans;
(iii) modify accounting for termination benefits, including distinguishing
benefits provided in exchange for service and benefits provided in exchange
for the termination of employment and affect the recognition and measurement
of termination benefits; and
(iv) clarify miscellaneous issues, including the classification of employee
benefits, current estimates of mortality rates, tax and administration costs
and risk-sharing and conditional indexation features.
IAS 27: Consolidated and separate financial statements
IAS 27 is expected to be adopted by Central Rand Gold for the first time for
its financial reporting period ending 31 December 2013.
The standard was reissued as IAS 27 Separate Financial Statements.
Consolidation requirements previously forming part of IAS 27 (2008) have been
revised and are now contained in IFRS 10 Consolidated Financial Statements.
The impact on the financial statements for Central Rand Gold has not yet been
Other amendments to standards effective on or after 1 January 2012 are not
expected to have a material impact on the Group.
The preparation of the financial statements requires the Group`s management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. The determination of estimates requires the exercise of
judgement based on various assumptions and other factors such as historical
experience and current and expected economic conditions. Actual results may
differ from these estimates.
5. Financial risk management
The Group`s activities expose it to a variety of financial risks: credit risk,
liquidity risk and market risk (including currency risk, interest rate risk
and gold price risk). The Group`s overall risk management programme focuses on
the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group`s financial performance. The Board monitors this
risk management process.
Foreign Currency Rates
The US Dollar rates of exchange applicable to the year are as follows:
Year ended 31 December Year ended 31
2011 December 2010
Closing Average Closing Average
South African 0.15090 0.13721 0.13482 0.12057
Pound Sterling 1.54710 1.54633 1.59257 1.56593
6. Property, plant and equipment
Property, plant and equipment transferred to non-current assets classified as
held-for-sale amounts to US$3,856,619 and relates to gold processing
7. Environmental guarantee investment
In 2011, the Company restructured from a cash environmental guarantee to an
insurance guarantee investment. The policy was entered into on 1 May 2011
which covers the Company for a total amount of US$5,031,573 (ZAR40,840,689) in
the event of an environmental rehabilitation program.
8. Non-current assets held for sale
At 31 December 2010, the Group classified the Gekko 50 tonne per hour
processing plant as non-current assets held-for-sale. During the period, the
Group disposed of the Gekko 50 tonne per hour for US$3,754,890.
Items of plant and machinery, being the Bateman plant, the Optical Ore Sorter,
the Gekko 20 tonne per hour processing plant, the Sandvick jumbo and the GIA
charger have been classified as held-for-sale during the period.
The value of the asset is now expected to be realised from the sale of the
asset rather than the continuing use. At year-end, the Group valued the
Bateman plant at US$1,424,809, the Optical Ore Sorter at US$584,217, the Gekko
20 tonne per hour plant at US$103,094, the Sandvick jumbo at US$287,307 and
the GIA charger at US$184,800.
The value of assets transferred to non-current assets held-for-sale is
US$3,416,520 at 31 December 2011. 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$939,505 to its fair value less costs to sell.
9. Loans receivable
9. Loans receivable
At 1 January 9,830 7,818
Interest for the year 1,048 999
Effect of movements in exchange (1,922) 1,013
At 31 December 8,956 9,830
Puno Loan Agreement, a further loan of ZAR39,068,963 (US$5,782,207) to Puno
Gold Investments Proprietary Limited ("Puno").The loan bears interest at South
African prime lending rate plus 2% and is payable as and when free cash flows
as determined by the Board of CRGSA are available.
During 2007, a dispute arose between the shareholders of CRGSA in regard to
the allocation of intercompany loans which fund the budget and work programme
and the incurring of, and level of, certain costs by CRGSA. Subsequently, on
16 February 2009, CRGNV, the direct holding company of CRGSA, exercised the
call option granted to it in terms of the shareholders` agreement and gave
Puno 90 days` notice to acquire Puno`s entire interest in CRGSA ("the call").
During April 2009, Puno made an urgent application to the South Gauteng
Division of the High Court of South Africa to interdict CRGNV from proceeding
with the call pending the final determination by arbitration of the validity
and enforceability of:
(1) the various funding calls made by CRGSA and the consequent call; and
(2) the interpretation of the shareholder funding provisions of the
The parties agreed that the matter would proceed to arbitration as sought in
the application. Puno, in its capacity as claimant in the matter delayed and
ultimately failed to bring the matter before the Arbitration Foundation of
South Africa ("AFSA") and, consequently, in an effort to expedite matters,
CRGNV and CRGSA approached AFSA as respondent requesting that an arbitrator be
appointed and that arbitration proceedings commence. In response to this
request during September 2010, AFSA advised the Company that it would indeed
appoint an arbitrator and Judge Lewis Goldblatt was subsequently appointed.
During October 2010, however, Judge Goldblatt found that the matter could not
proceed to arbitration as the matter was not brought before him by the
claimant in the matter ("Puno") but rather was sought to be brought by the
respondent ("Central Rand Gold"). Following from this finding, Puno has
indicated its intention to challenge the validity and constitutionality of the
CRGSA shareholders` agreement despite having based various of its court
applications thereon - including the application brought in the South Gauteng
High Court, Johannesburg, South Africa, against CRGNV, the Company and CRGSA,
in which it sought to interdict CRGSA from proceeding with mining operations
pending an arbitration award or court order on the proper interpretation of
clause 18 of the CRGSA shareholders` agreement. This ultimately failed as the
court found 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.
In an effort to bring this matter to finality, various alternatives are now
being investigated, amongst them being:
(i) methods in which Central Rand Gold itself can commence arbitration
(2) various other non-arbitration-based methods to conclude the dispute
between the CRGSA shareholders.
It should be noted, however, that in the event that the matter not be
successfully brought to arbitration or resolved by other means, CRGNV will not
be able to introduce a new BBBEE-compliant partner who the Directors believe
will be more beneficial for the Group as a whole.
Despite the above, the Directors remain confident of success and further
believe that the return of the shares by Puno will not have any material
consequences in respect of the consolidated accounts of the Group as the 26%
shareholding will be held in trust pending the outcome of discussions relating
to new BEE arrangements. Notwithstanding this position, we 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 ZAR15,852,103 (US$2,204,552) between 1 January and 31
December 2011 and ZAR75,913,440 (US$10,416,083) between 1 January and 31
December 2010, and ZAR295,947,734 (US$39,899,673) prior to 1 January 2010.
10. Prepayments and other receivables
Prepayments contains US$3,627,561 (ZAR29,444,487), which relates to the cost
of acquiring the submersible water pumps that are required to stop the rising
water table in the Central Basin.
Consumables 339 59
Ore stockpiles 1,967 125
Stationery and office consumables on hand - 23
Total inventories 2,306 207
The amount of the write-down of ore stockpiles to net realisable value, and
recognised as an expense is US$332,335 (2010: US$263,451).
During the current year, the composition of the Board of Directors changed.
Two Directors of the Group, Mr N. Farr-Jones and Mr J. Brauns, resigned on 24
Group 2011 2010
a) Various contractual amounts
Fees payable to iProp Limited for 500 500
Fees payable to Sekgwa Mining 2,145 -
Services Proprietary Limited for
underground mining services
Fees payable to Stallion Security 501 501
Proprietary Limited for security
Fees payable to the Department of - 2
Mineral Resources within one year
Plant and equipment contracted for 458 6,517
b) Donations payable
Donations payable to Umkhonto we - -
Sizwe Military Veterans Association
14. 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.
15. Share-based payments
Grant of options in the Company
During the year, further share options were granted to
selected employees. The options granted are summarized
Vesting Strike Price Allocation
6,000,000 on 8 November 2012, Exercise Mr S.J. du
6,000,000 on 8 November 2013 and price Toit
6,000,000 on 8 November 2014. escalates in
One third at
one third at
3,800,000 on 8 November 2012, Exercise Mr P.
3,800,000 on 8 November 2013 and price Malaza
3,800,000 on 8 November 2014. escalates in
One third at
one third at
10,000,000 on 8 November 2012, Exercise Executive
10,000,000 on 8 November 2013 and price Management
10,000,000 on 8 November 2014. escalates in
One third at
one third at
16. Related parties
Except for the information disclosed in Note 15 Share-based payments above, no
other disclosable related party transactions occurred in the period.
17. Events occurring after balance sheet date
No material changes, other than those highlighted in this report, have
occurred in the affairs of the Group between the end of the financial year and
the date of this report.
Issued on behalf of: Central Rand Gold Limited
Date: 2 April 2012
Date: 02/04/2012 10:02:05 Supplied by www.sharenet.co.za
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