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CENTRAL RAND GOLD LIMITED - Unaudited Preliminary Annual Results

Release Date: 16/05/2014 14:31:00      Code(s): CRD       PDF(s):  
Unaudited Preliminary Annual Results

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)
LSE share code: CRND JSE share code: CRD
("Central Rand Gold" or the “Company” or the “Group”)

Unaudited Preliminary Annual Results

Central Rand Gold today announces its unaudited preliminary annual results for the year
ended 31 December 2013.

- Redstone Capital Limited (“Redstone Capital”) became a cornerstone investor, injecting
  US$7.25 million (US$6.89 million net) into the Company (announced 2 August 2013).
- Appointment of two new Non-executive Directors - Nathan Taylor (announced 20
  September 2013) and Jason Hou (announced 2 December 2013).
- A major plant upgrade including: a new primary crusher and screen circuit; installation of
  a secondary crushing circuit; and acquisition of a new ball mill.
- Positioning operations to maximise ore production, processing, gold production and
  expansion opportunities within New Order Mining Right areas.
- Transferring stock exchange listings to the Alternative Investment Market (“AIM”) of the
  London Stock Exchange and the Alternative Exchange (“AltX”) of the JSE Limited on 18
  September 2013.

Post period events
- In January 2014, the Company successfully completed an Open Offer raising £1.69
  million, culminating in Redstone Capital investing a further £2.11 million by taking up its
  rights in terms of the share Option Agreement.
- Michael McMahon stepping down from the Board as Chairman and appointment of Allen
  Phillips as a new Independent Non-executive Director.

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, will be available on the Company’s website www.centralrandgold.com
on or before 30 May 2014.

For further information, please contact:
Central Rand Gold                                               +27(0) 87 310 4400
Johan du Toit / Patrick Malaza

Charles Stanley Securities Limited                             +44 (0) 20 7149 6478
Marc Milmo / Mark Taylor

Merchantec Capital                                             +27 (0) 11 325 6363
Monique Martinez / Marcel Goncalves

Buchanan Communications Limited                                +44 (0) 20 7466 5000
Bobby Morse / Louise Mason

Jenni Newman Public Relations                                   +27 (0) 11 506 7351
Proprietary Limited
Jenni Newman

Chairman’s report

I present to you the Annual Report of our Company for 2013, a year characterised by much
progress in mining, on-going metallurgical frustrations, and the securing of a major new
investor which provided the Company with the capital to tackle the processing difficulties
that have impacted the Company.

There have been two General Meetings of shareholders since our last Annual General
Meeting, one in August 2013 to approve the Convertible Loan arrangements with Redstone
Capital and one in January 2014 in connection with the Open Offer promised at the time of
the Convertible Loan.

Since these matters were fully publicised at the time, I will not repeat them here other than to
remind shareholders that the Convertible Loan raised a gross US$7.25 million (£4.757
million) and the Open Offer raised a gross US$2.2 million (£1.685 million). On 25 March
2014, it was further announced that Redstone Capital had exercised 73.6% of the options
available to it following the Open Offer and had accordingly acquired 23,991,300 shares for a
gross consideration of US$3.4 million (£2.11 million).

Following the exercise of its option, Redstone Capital is currently interested in approximately
31.91% of the Company’s issued share capital. Should Redstone Capital ultimately convert
its loans and warrants fully to shares it will then hold approximately 67.28% of the
Company’s issued share capital.

I believe that following completion of the Open Offer and the Redstone funding, which has
enabled the Company to make the required changes to its processing plant, it is an
appropriate time for me to step down as Chairman and as a Director of the Company.
From this date, Mr Nathan Taylor of Redstone Capital, who joined the Board in September
last year is appointed as Interim Chairman. He and Redstone Capital have the ability and
power to take CRG towards its true destiny and I wish him every success in those efforts.

Current status
It is not my intention to repeat matters covered so well in the CEO’s report; I merely
characterise the year in summary as follows:

- The gold price and the Rand/US Dollar exchange rate have supported our endeavours.
- We have (thus far) been spared the labour relations torment of the major players in the
  gold and platinum industries.
- The government-led dewatering plant for the Central Wits Basin (in which we sit) will
  start up in May 2014, so this can come off our anxiety list.
- The tensions of recent years in our relations with the Department of Mineral Resources
  have subsided, and there have been no further threats to our Mining Rights.
- The dispute with Puno, our Broad-Based Black Empowerment partner, staggers onwards
  with no real progress. This has not impacted the Company during the year.
- The Company’s reserve base continues to mature and expand, with current operations at
  CMR East having joined the operating CMR West as a formal Reserve.
- The Company continues to find new surface material to mine. Open cast operations are
  indicated to continue until at least September of 2014.
- Our conventional hand-held drilling mining has matured into a sensible and predictable
  operation. Underground efforts at grade control, both in terms of blasting techniques and
  waste removal, have delivered stable grades and Mine Call Factor, all of which provides
  (at last) some certainty in the budgeting and financial planning arenas.
- The successful resolution of so many of our problems has been largely undone by the
  continued unreliability of our metallurgical plant.
  When operational, this plant delivers to industry best practice in terms of recovery, but the
  downtime and cost of major repairs have interrupted production so as to turn a potentially
  profitable year into a substantial loss. This has indeed been our ‘Achilles’ heel’.
- The securing of funding from Redstone Capital and from our shareholders in the Open
  Offer has put the Company in a position to move from running (and repairing) on an ad-
  hoc basis to a proper ‘Stop-Fix’ correction programme.
- While the Company had been expecting to make a modest profit and be cash-positive over
  the year, the reality was an ‘All-in’ operating cost that was US$447 per ounce higher than
  last year at US$2,425 per ounce, an operating loss, and a net cash draw down of US$8.9
- Significant capital expenditure on metallurgical plant upgrades and the operating shortfall
   have been accommodated by the inflow of new funds leaving the Company at a reasonable
   year-end cash balance of US$2.5 million.

‘Born again’
Courtesy of the injection of new funds, as led by Redstone Capital, the Company finds itself
in a much stronger position than it did last year.

The refurbishment of the metallurgical plant was started in earnest in September 2013 and is
well on the way to completion in the second quarter of 2014. There are high expectations of a
year that delivers to budget, though profitability is only really expected from June 2014, once
plant modifications and their associated interruptions are complete.

From that base, the Company is investing in the refurbishment of its underground trackless
mining fleet with a view to restarting development underground in the middle of the year and
doubling production rates by the end of the year.

Your Board hopes to be able to demonstrate the case for a vibrant future meriting the
progressive exploitation of its vast mineral holdings.

The AIM listing
As part of the Convertible Loan approval in August last year, it was agreed to move from the
LSE’s Main Board to the AIM listing, and from the JSE’s Main Board to the AltX. This was
accomplished without difficulty.

The situation with our Broad-based Black Economic Empowerment partner is not improving.
In December 2013, the long awaited court hearing to compel the appointment of an arbitrator
in our dispute, was held. Regrettably, the matter was not heard on its merits, but was
surprisingly dismissed on the basis of prescription, due to the time this had all taken.

Given that the delays were substantially and purposely caused by Puno, we find this so
surprising that the matter has been taken on appeal.

With the move to an AIM listing the structures of the Combined Code do not formally apply.
Your Board has resolved to operate as far as practical to the standards set and required in the
past, with the only changes thus far being firstly, with the arrival of two nominee Directors
from Redstone Capital there was no longer a majority of Independent Directors on the Board.
Your Board felt comfortable that in a structure with a controlling shareholder a balance
between Executive, Non-executive (nominees) and Independent Directors at two of each was
optimal. The incoming Chairman and his Board are aware that the loss of the two
Independent Directors (Miklos Salamon and myself) and the recruitment thus far of one (Mr
Allen Phillips) leaves the overall balance of the Board as unfinished business.

Secondly, it should be noted that the appraisal processes for the Board, its Committees and
the Executive Directors are still completed, but in a less formal fashion.

We have previously listed minimal staffing as an exposure in terms of internal controls.
While this is still the case it does not constitute a non-compliance with AIM governance
expectations. There is a separate section on Governance in the body of the Annual Report,
but it does reflect the past. Changes to Board composition will naturally now require
restructuring of Board committees.

I express a warm welcome to the two new Directors nominated by Redstone Capital, Messrs
Nathan Taylor and Jason Hou, and to Mr Allen Phillips as a new Independent Director. I
leave the Company in good hands.

As part of this orderly progression Miklos Salamon resigned from the Board on 1 April 2014.
Miklos has been an Independent Director since 2008 and from his wealth of international
mining experience he has been absolutely key to the determination of the right technical and
production direction of the Company. He leaves with the thanks and best wishes of the whole

I extend my thanks to the rest of the Board and to the Executive Team.

Michael McMahon
Chief Executive Officer’s report


Redstone Capital
Without doubt the main highlight of 2013 was attracting Redstone Capital as our cornerstone
investor, enabling the Company to significantly upgrade plant and equipment towards making
a meaningful improvement in production in 2014.

Announced in August 2013, this transaction raised US$7.25 million (US$6.89 million net)
through the issue of convertible Loan Notes to Redstone Capital. Redstone Capital is a
special purpose Hong Kong-registered investment company focusing on gold investment
opportunities in Sub-Saharan Africa.

Considering that the international market trend has not been favourable to junior miners, it
was extremely timely and satisfying for the Company to attract a serious investor with a
proper understanding of the potential of our operations and broader resource base.

The funds raised from this important capital injection have enabled Central Rand Gold to
upgrade vital plant and equipment, focus on further development of underground mining, and
boost general working capital reserves.

Following the conclusion of the Redstone Capital transaction, two new Independent Non-
executive Directors joined our Board – Jason Hou and Nathan Taylor. It is great to have them
as part of the team that is steering Central Rand Gold towards a brighter and more prosperous
future for all stakeholders.

Successful Open Offer to shareholders
The successful Open Offer to shareholders, announced in December 2013, was hugely
beneficial to the Company. The Open Offer, at the same price as the Redstone Capital
transaction (8.78 pence or 149 South African cents), raised £1.69 million. Following the
Open Offer, Redstone Capital exercised 73.6% of the options available to it and had
accordingly acquired 23,991,300 shares for a gross consideration of US$3.4 million (£2.11

Funds from this capital raising are being allocated towards the following: continuing to open
up the resource base in the CMR tenement area; furthering underground development;
undertaking studies into mining down to 900 metres below surface as dewatering of the
Central Basin gives deeper access to underground resources; conducting feasibility studies
into other tenement areas; and potentially owning and operating more of our own equipment
to reduce operating costs.

Upgrade of plant and equipment
As a direct result of the additional funds, the Company was able to procure and install a
primary jaw crusher and rent and install a secondary gyratory core cone crusher which has a
capacity in excess of 30,000 tonnes per month. An additional ball mill and leach tanks have
been procured to increase overall processing capacity beyond 25,000 tonnes per month.

Mining capacity currently stands at around 25,000 tonnes per month. So it is evident that we
are building surplus milling and crushing capacity to cater for future needs. This spare
capacity will lessen the current pressure on the existing milling circuit, enabling more
proactive and effective maintenance, thus ensuring improved uptime. The increased milling
capacity and availability will also lessen the Company’s reliance on external tolling which
will improve both revenue generation and operating margins.

Transfer to AIM and AltX
On 18 September 2013, Central Rand Gold shares began trading on the London AIM
exchange and Johannesburg’s AltX exchange. This transfer from the Main Boards of the LSE
and the JSE was smoothly undertaken and is a much better reflection of the Company’s size
and stature, as well as being much more cost effective and less burdensome from an
administrative point of view.

Acid mine drainage (“AMD”)
It is pleasing to report that progress has been made in this important area with Trans-Caledon
Tunnel Authority (“TCTA”) expecting to commission the dewatering plant and submersible
pumps at the end of May 2014.
The Company donated two Ritz submersible pumps to this vital dewatering project within the
Central Basin which was delivered to TCTA in 2013. With the water level at the end of April
2014 being approximately 186 metres below the surface, ongoing pumping and dewatering
will not only have considerable environmental benefits, but will also give mines such as ours
much improved access to deeper mining levels over time.

Mining update

• Mining production 26% above last year to 254,979 tonnes (2012: 202,709 tonnes).
• The CRG East Horizontal project’s Mine Design and Scheduling was completed.
• The Crown Scoping Study was completed.

Safety was a challenge throughout 2013 which pushed the Company to intervene through,
among other things, the CRG Safety and Production Initiative and also to align the 2013 CRG
Safety, Health, Environment and Quality (“SHEQ”) Action Plan, with risks and hazards
being faced.

In the period under review, while there were no fatalities, the majority of accidents were as a
result of rolling rocks and we have concentrated on the removal of overhanging rocks on the
up-dip sides of the working places and also on installation of gate stulls, as a priority.

We ended the year with 15 lost-time injuries, of which the last four were caused by the
negligent and reckless operation of a personnel transporter. This also increased the number of
dressing cases (treat and return) from 11 to a total of 21. The majority of dressing cases were
related to slip and fall accidents as a result of working in steep stope areas.

Safety statistics
Type of injury                                              2013                            2012
Dressing cases                                                21                               6
Lost-time injuries                                            15                              13
Incidents                                                     19                               3

The above table shows overall safety statistics for 2013, comparing actual statistics to those
achieved in 2012.
However, it is with great sadness that the Company reports a fatal accident this month. Our
condolences go out to his family. This is a tragic accident given the safety record of the
Company over the last few years. Health and safety continues to be a core focus for the
Company as we strive to adhere to international health and safety best practices.

The following table shows key mining statistics for 2013, comparing the actual statistics with
those achieved in 2012.

                                        2013                       2012                   Variance
                       Metres (m)       Grade   Metres (m)        Grade    Metres (m)        Grade
                       Tonnes (t)       (g/t)   Tonnes (t)        (g/t)    Tonnes (t)         (g/t)
Waste                         595                      313                        282
Reef Development              559                      200                        359
Total (m)                   1,154                      513                        641
Stoping (t)               150,987        3.50      111,671         4.58        39,316        (1.16)
Open Pits (t)             103,992        2.64       91,038         3.11        12,954        (0.46)
Total Tonnes              254,979        3.15      202,709         3.92        52,270

Underground production
Production increased by 35% over last year to 150,987 tonnes (2012: 111,671 tonnes) on the
back of newly opened stoping areas. Approximately 241,841 tonnes of ore is still available
and this will only require minimal waste and on-reef development to optimise. These tonnes
will provide approximately 17 months of production at current target levels.

Conventional stoping
This concept has been fully adopted as CRG’s Mining Method. All Mine Designs that have
been completed, and those that will be done in the future, are to be based on the Conventional
Stoping method.

Open pits production
Open pits production increased by 14% over last year to 103,992 tonnes (2012: 91,038
tonnes) on the back of the new opened Nasrec pit. The mined grade did, however, drop
during the year by 0.46 g/t to 2.64 g/t.

There was no mining on the open pits during December 2013 to March 2014 as a result of
plant upgrade and the fact that adequate amounts of stockpiles were attained.

As at 31 December 2013, there were approximately 66,000 tonnes of reef remaining at
Nasrec Pit 1.

Metallurgical update

Production summary
                                                        2013                            2012
- Tonnes processed (t)                               151,279                         171,110
- Built-up head-grade (g/t)                             1.79                            2.06
- Fine gold produced (oz)                              7,675                          10,243

External ( Toll treatment)
- Tonnes processed (t)                                 47,435                         48,264
- Delivered grade (g/t)                                  1.78                           2.24
- Fine gold produced (oz)                               2,621                          3,466
Total tonnes processed (t)                            198,714                        219,374
Total gold produced (oz)                               10,296                         13,709

Internal Production
Although 2013 still had fundamental challenges around the metallurgical processing plant
stemming from 2012, significant progress was made to upgrade the metallurgical plant’s
capacity and availability made possible by the Redstone Capital funding. The funding has
been earmarked to undertake a number of upgrades to the metallurgical processing plant to
improve reliability and to increase the overall plant capacity to approximately 25,000 tonnes
per month, in line with the current monthly surface and underground mining production.

The metallurgical plant’s ability to mill the harder sulphide ore has remained the production
bottleneck for the duration of 2013 and is likely to be resolved during the first half of 2014.
The two key factors that impacted the milling capacity were the inability to provide the mills
with consistent feedstock and to ensure the availability of the mills when feedstock was

Crushing and Screening
As reported earlier, during the first quarter of 2013, major modifications to the Vertical Shaft
Impactor (“VSI”) crushing circuit were undertaken with the aim of replacing the existing
open crushing configuration which required external mobile jaw crushers with a self-
contained closed circuit crushing train. The modifications were intended to optimise
tramming, eliminate external crushing costs and, most importantly, to minimise fine gold
losses during the primary crushing stage.

Batch testing of underground sulphide ore proved that the crushing capacity of the circuit was
not adequate to handle the harder sulphide rock and thus could not provide consistent feed to
the Bateman and CIL mills. The Company reverted back to making use of external crushing
capacity for the majority of the second and third quarters of 2013.

The Redstone Capital funding enabled the Company to procure and install a suitable primary
jaw crusher and screening circuit that has a crushing and screening capacity in excess of
30,000 tonnes per month. This primary jaw crusher is able to reduce hard underground
sulphide ore from a run of mine feedstock of 700mm to a secondary crusher feedstock of
90mm, whilst simultaneously screening the high grade 10mm fine fraction.
Commissioned during the end of 2013, the use of this primary jaw crusher will result in a
reduction in primary crushing costs from ZAR24 per tonne to an estimated ZAR12 per tonne
during 2014.

The Company also evaluated options for an appropriately sized secondary crusher with
nameplate capacity of 30,000 tonnes per month, matching the output capacity of the primary
jaw crusher, which could replace the previous VSI. In the interim, a secondary gyratory cone
crusher (“Chameleon Crusher”) has been rented as a pilot programme to further reduce the
primary jaw product down to a top size of 10mm with up to 25% passing 75 micrometres,
representing a much improved mill feedstock. The rented gyratory cone crusher was fully
commissioned at the end of September 2013. The Chameleon Crusher is currently delivering
crushed product as designed. However, the current availability levels of <60% remains a
concern. The Company believes the availability of the Chameleon crusher can be rectified.
The Company is also considering other secondary crushing options that will ensure the
delivery of appropriate and consistent mill feed. It is pleasing to note that the Company now
has a far more robust and efficient method of crushing and screening its run of mine gold
bearing ore.

Milling capacity
Continuous failures of the gearbox and drive train configuration of the Bateman 7’ x 10’ ball
mill caused significant milling downtime during the first half of 2013, resulting in the
reported decrease in processed tonnes.

Full root-cause analyses of these failures were carried out at the end of May 2013 and the
current modifications to the Bateman Mill appear to have resolved many of these issues as
the availability increased from an average of 60% for the first trimester to an average of 87%
for the remainder of the year.

The CIL 9’ x 12’ ball mill also experienced unplanned drive train failures. A planned five-
day shutdown of the CIL mill in early January 2013, to replace a worn pinion gear, was
extended for a further seven days upon discovery of a bent pinion coupling shaft which
required additional fabrication.

The mill was returned to full production at the end of January 2013. The mill performed
reasonably well until the end of October 2013 with an average availability of 84%. The feed-
end trunnion bearing failed and was replaced during the first week of November 2013. A
root-cause analysis showed that the failure was due to cyclone and concentrator spillage
around the bearing, which was subsequently addressed. A manufacturing defect caused the
installed bearing to cease operating three weeks after installation. Although two of the critical
bearings were ordered during the second week of November 2013, a worldwide
unavailability of the bearings caused the bearing only to be installed on 16 January 2014.
The unavailability of the bearing severely impacted the production of the plant for a period of
eight weeks.

As a result of lower plant throughput due to poor availability and lower surface grades,
internal gold production was down 25% to 7,675 ounces (2012: 10,243 ounces).

The focus for 2014 will be to increase both mills’ availability to above 90%.

The Company has procured an additional 9’ x 10’ ball mill that will effectively increase
milling capacity by 12,000 tonnes per month. This strategy follows the overall metallurgical
plant philosophy of ensuring full redundancy and assuring maximum total plant availability.
Once the aforementioned ball mill has been commissioned, the Company will have milling
capacity in excess of 25,000 tonnes per month. The mill installation is expected to be
commissioned by the end of the second quarter of 2014.

Further metallurgical upgrades
With the upgrades of both Crushing and Milling aspects of the plant providing additional
processing capacity, it became key to simultaneously consider the upgrade of the downstream
processing components. These upgrades include improving the elution circuit and increasing
leaching capacity and the Company looks forward to updating shareholders throughout 2014.

External production (Toll treatment)
As a consequence of internal plant challenges, about 47,435 tonnes (2012: 48,264 tonnes)
were toll treated with Mogale realising about 2,621 fine gold ounces (2012: 3,466 ounces).

In total, gold production fell 25% to 10,296 ounces (2012: 13,709 ounces).

Looking forward
The first quarter of 2014 has been impacted by the work we have been undertaking to
upgrade our processing plant. Total underground mine production for the quarter was 37,571
tonnes (2013: 53,808 tonnes) mainly due to surface mining put on hold until the plant is fully
commissioned. As a result, tonnes processed down 12% to 43,462 tonnes (2013: 49,229).
Looking forward with the changes in the metallurgical plant we will focus on increasing
capacity and the availability of the plant. Root-cause analyses, bottleneck management and
reduction of variability and standardisation will continue to form a strong base for achieving
production and cost saving objectives for 2014.

Geological and mine call factor update

SAMREC Mineral Resources for the Main Reef underlying CMR were updated in February
2014, incorporating additional sampling information captured during 2013 and recording
depletions during the same period. This resource update was undertaken by Dr Carina
Lemmer, an independent geostatistician and Competent Person in terms of the SAMREC

SAMREC Compliant Mineral Resources
                                           February 2014                            June 2013
                            Tonnes     Grade       Content    Tonnes      Grade      Content
Area        Category           (Mt)       (g/t)      (Moz)       (Mt)       (g/t)      (Moz)
CMR         Measured           1.46       3.65         0.17       1.33      3.57         0.15
            Indicated         11.30       4.53         1.64     12.13       4.30         1.68
            Inferred           4.34       5.60         0.78       4.34      5.60         0.78
            Exploration       15.86       8.49         4.33     15.86       8.49         4.33
Crown       Indicated          2.58       5.67         0.47       2.58      5.67         0.47
            Inferred           2.77       7.19         0.64       2.77      7.19         0.64
            Exploration       24.34       9.61         7.52     24.34       9.61         7.52
City        Indicated           0.78      7.58          0.19      0.78       7.58         0.19
            Inferred            0.70      8.00          0.18      0.70       8.00         0.18
            Exploration       22.95       9.66          7.13     22.95       9.66         7.13
Village     Indicated           0.53      5.87          0.10      0.53       5.87         0.10
            Inferred            0.17     14.64          0.08      0.17      14.64         0.08
            Exploration       13.57      10.57          4.61     13.57      10.57         4.61
Simmers Indicated               0.73      8.10          0.19      0.73       8.10         0.19
            Inferred            0.15      8.29          0.04      0.15       8.29         0.04
            Exploration         9.55     10.29          3.16      9.55      10.29         3.16
Other       Indicated              -          -            -          -           -          -
            Inferred               -          -            -          -           -          -
            Exploration       33.67       8.34          5.41     33.67       8.34         5.41
Total       Measured            1.46      3.57          0.17      1.33       3.57         0.15
Total       Indicated         15.92       5.06          2.59     16.75       4.88         2.63
Total       Inferred            8.13      6.58          1.72      8.13       6.58         1.72
            Exploration      119.94       8.34        32.16     119.94       8.34        32.16
Total       Target
Grand                        145.45       7.84        36.64     146.15       7.80        36.66
*Totals are based on additional decimal points resulting in minor total discrepancies.

These resources have been modified to reflect the rising AMD water level. Measured,
Indicated and Inferred Resources extend to a maximum depth of 450 metres below surface,
that being the current maximum depth the newly installed Ritz pumps can dewater to.
Resources deeper than this level are currently classified as ‘Exploration Target’, a downgrade
which reflects the ability of the Company to currently access these submerged resources. If it
can be demonstrated using appropriate costing studies that part or all of this Exploration
Target can be economically accessed, that part will revert to its previous Indicated and
Inferred Resource status. The Company is currently investigating these options.

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 (Pty) Limited and has 20 years’ experience in exploration,
mineral resource management and mineral evaluation.

Mine Call Factor
The Mine Call Factor (“MCF”) during 2013 showed a significant improvement in the first
half of the year with ‘face to pour’ MCF recon peaking at 100% in April 2013 and averaging
73% for the period January to July 2013. The second half of 2013 showed a more depressed
MCF due in the main to significant mobile crusher availability issues resulting in the
construction of a company-owned static crusher circuit in the fourth quarter. The December
2013 commissioning of the new circuit did see a significant uptick in MCF in December
2013 with 85% being achieved, albeit on low grades and tonnage. The face to pour MCF for
2013 is estimated at 71%.

Gold production
While it was disappointing that gold production fell to 10,296 ounces, management is
confident that operations are well positioned for increased gold production this year, as well
as making significant progress in underground mining development and exploration of
tenement areas.

Financial update

The net loss for the full year to 31 December 2013 amounted to US$13.3 million (37.60 cents
per share) against a loss of US$4.5 million (0.28 cents per share) in 2012. This increased loss
is mainly attributed to the following factors:
• A 34% reduction in gold revenue on the back of lower throughput due to poor plant
   availability, a lower than expected mine call factor, lower tail end surface grades and
   lower realised average gold prices.
• Higher than anticipated plant and mine mobile equipment repair costs combined with
   attendant plant hire costs.
• Higher utility and diesel fuel costs.
• The above factors were partially mitigated by the impact of the weaker Rand/US Dollar
   exchange rates on Rand denominated costs and sales of redundant assets and waste rock.

As a consequence, all-in cash operating costs per ounce rose to US$2,425 per ounce against
the prior year’s US$1,973 per ounce.

Cash and cash equivalents
Cash and cash equivalents is reported at US$2.48 million against the prior year’s balance of
US$4.5 million largely due to:
• higher cash operating costs;
• significantly lower gold production;
• ore stockpile build up; and
• plant upgrade investment, improved by a US$7.25 million 8% loan note (equivalent of
   54,182,436 shares at £0.0878 per share) fund-raising exercise from Redstone Capital in
   August and September 2013.

Post balance sheet event

In order to strengthen its balance sheet and in pursuit of achieving its stated mine plan, the
Company has subsequent to year-end completed the following fundraising:
- In a partially underwritten open offer to shareholders on 20 January 2014 issued
   19,196,065 shares at £0.0878 per share which raised US$2.23 million (£1.69 million).
- On 21 March 2014 Redstone Capital exercised 73.6% of the options available to it
   following the Open Offer and had accordingly acquired 23,991,300 shares for a gross
   consideration of US$3.4 million (£2.11 million).
Following the exercise of its option, Redstone Capital is currently interested in approximately
31.91% of the Company’s issued share capital. Should Redstone Capital ultimately convert
its loans and warrants fully to shares it will then hold approximately 67.28% of the
Company’s issued share capital.

On 1 April 2014 it was announced that Non-executive Director, Miklos Salamon, tendered
his resignation from the Board of Directors with immediate effect.

On 16 May 2014 it was announced that Independent Non-executive Director and Chairman,
Michael McMahon, tendered his resignation from the Board of Directors, and that Allen
Phillips was appointed to the Board of Directors as Independent Non-executive Director, both
with immediate effect.

The meaningful investments made in plant and equipment during 2013 place the Company in
a good position to make substantial progress on a number of fronts during 2014 – including
ore production, processing, gold output, underground development and further exploration of
tenements within our New Order Mining Right areas.

At 31 March 2014 the Group had cash and cash equivalents of US$5.4 million. Whilst gold
production in the first quarter was lower as result of plant upgrades in progress, delayed
restart of open pit mining and resulting cash burn, our goal in 2014 is to stabilise ore
production at 25,000 tonnes and generate annual gold production of around 16,000 ounces.
As a result, Directors continue to adopt the going concern basis in the preparation of the
financial statements. Further consideration of this is set out in note 1.1.
To be able to maximise our resource base opportunities, further development and analysis
work will be undertaken to access additional mining areas. Successful dewatering of the
Central Basin through the TCTA project, to which the Company has donated two pumps, will
allow access to deeper parts of our mining operations in the second half of the year.

Sincere thanks must go to everyone who has played a role in the Company successfully
negotiating another challenging, yet rewarding year. All stakeholders have made a
meaningful contribution to Central Rand Gold’s ongoing development as a sustainable junior
mining enterprise – this includes Directors, managements, staff, suppliers, shareholders and
community members.

Johan du Toit
Chief Executive Officer

Statement of financial position as at 31 December 2013

                                                               2013           2012
                                                            US$'000        US$'000
                                                         (Unaudited)      (Audited)
Non-current assets
Property, plant and equipment                                  3,619         4,485
Intangible assets                                              3,131         3,874
Security deposits and guarantees                                 194           262
Environmental guarantee investment                             3,338         4,003
Loans receivable                                               8,571         9,560
                                                              18,853        22,184

Current assets
Security deposits and guarantees                                  70            79
Prepayments and other receivables                                914           952
Inventories                                                      910         1,241
Cash and cash equivalents                                      2,475         4,512
Non-current assets held-for-sale                                 174             -
                                                               4,543         6,784

Total assets                                                  23,396        28,968

Attributable to equity holders of the parent
Share capital                                                 25,604        25,604
Share premium                                                213,377       213,377
Share-based compensation reserve                              28,224        28,176
Treasury shares                                                  (6)           (6)
Foreign currency translation reserve                        (29,442)      (28,658)
Loan note equity reserve                                       1,298             -
Accumulated losses                                         (244,840)     (231,499)
                                                             (5,785)         6,994
Non-controlling interest                                          -              -
Total equity                                                 (5,785)         6,994

Non-current liabilities
Environmental rehabilitation                                   5,713         6,223
Loan payable                                                  16,342         9,560
                                                              22,055        15,783

Current liabilities
Trade and other payables                                       6,971        6,081
Taxation payable                                                 155          110
                                                               7,126        6,191

Total liabilities                                             29,181       21,974

Total equity and liabilities                                  23,396       28,968

Statement of financial performance for the year ended 31 December 2013

                                                                    2013             2012
                                                                 US$'000          US$'000
                                                             (Unaudited)         (Audited)
Revenue                                                           14,627                -
Production costs                                                (16,344)          (13,723)
Employee benefits expense                                        (3,969)           (4,387)
Directors' emoluments                                              (850)             (959)
Inventory write-up/(down)                                             39           (1,010)
Operating lease expense                                            (523)           (1,006)
Operational expenses                                             (1,583)           (4,211)
Other expenses                                                   (2,860)           (2,582)
Other income and gains                                               622           23,208
Foreign exchange transaction gains/(losses)                        (121)              (38)

Earnings before interest, tax and depreciation                  (10,962)           (4,708)

Depreciation                                                       (536)             (589)
Impairment of assets                                               (224)           (1,218)
Loss on fair value of convertible loan note                      (1,824)
Finance income                                                     1,159            1,331
Finance costs                                                      (954)           (1,019)
Loss before income tax                                          (13,341)           (6,203)
Income tax expense                                                    -             1,696
Loss for the year                                               (13,341)           (4,507)

Loss is attributable to:
Non-controlling interest                                              -                 -
Equity holders of the parent                                    (13,341)           (4,507)
                                                                (13,341)           (4,507)
Loss per share for loss attributable to the equity holders during the year (expressed in
US cents per share)
Basic loss per share                                             (41.70)           (0.28)
Headline loss per share                                          (43.39)           (0.29)
Diluted loss per share                                           (41.70)           (0.28)
Shares in issue
Weighted average number of ordinary shares in issue           31,993,443   1,599,682,990
Fully diluted weighted average number of ordinary shares in   31,993,443   1,599,682,990

Statement of comprehensive income for the year ended 31 December 2013

                                                               2013           2012
                                                            US$'000        US$'000
                                                         (Unaudited)      (Audited)

Loss for the year                                           (13,341)        (4,507)

Other comprehensive loss:
Exchange differences on translating foreign operations         (784)          (336)
Other comprehensive loss for the period, net of tax            (784)          (336)
Total comprehensive loss for the period                     (14,125)        (4,843)

Total comprehensive loss is attributable to:
Non-controlling interest                                           -              -
Equity holders of the parent                                (14,125)        (4,843)
                                                            (14,125)        (4,843)
                                     Attributable to equity holders of the Group

                                   Ordinary       Share      Share-based      Treasury
                                      share     premium     compensation        shares
                                    capital                      reserve
                                    US$'000     US$'000          US$'000       US$'000
Balance at 31 December 2011          25,604     213,377           28,018           (6)
Total comprehensive income for
the year
Loss for the year                          -          -                 -             -
Other comprehensive income
Foreign currency adjustments               -          -                 -             -
Transactions with owners,
recorded directly in equity
Employee Share Option Scheme:
Share-based payments:
Employees’ and Directors’ shares           -          -               158             -
and options
Balance at 31 December 2012          25,604     213,377            28,176           (6)
Total comprehensive income for
the year
Loss for the year                          -          -                 -             -
Other comprehensive income
Foreign currency adjustments               -          -                 -             -
Transactions with owners,
recorded directly in equity
Issue of convertible notes                 -          -                 -             -
Employee Share Option Scheme:
Share-based payments:
Employees’ and Directors’ shares           -          -                48             -
and options
Balance at 31 December 2013          25,604     213,377            28,224           (6)

                                              Attributable to equity
                                              holders of the Group

                                    Foreign     Loan   Accumu-   Total     Non-
                                   currency     note     lated
                                    transla-  equity    losses          contro-
                                                                         lling       Total
                                       tion  reserve
                                    reserve                            interest     equity
                                    US$'000  US$'000   US$'000  US$'000 US$'000    US$'000
Balance at 31 December 2011        (28,322)       -  (226,992)   11,679       -     11,679
Total comprehensive income for
the year
Loss for the year                         -       -    (4,507)  (4,507)       -    (4,507)
Other comprehensive income
Foreign currency adjustments          (336)       -         -     (336)       -      (336)
Transactions with owners,
recorded directly in equity
Employee Share Option Scheme:
Share-based payments:
Employees’ and Directors’ shares          -       -         -      158        -       158
and options
Balance at 31 December 2012        (28,658)       -  (231,499)   6,994        -     6,994
Total comprehensive income for
the year
Loss for the year                         -       -   (13,341) (13,341)       -  (13,341)
Other comprehensive income
Foreign currency adjustments          (784)       -         -     (784)       -     (784)
Transactions with owners,
recorded directly in equity
Issue of convertible notes                -   1,298              1,298             1,298
Employee Share Option Scheme:
Share-based payments:
Employees’ and Directors’ shares          -       -         -       48         -      48
and options
Balance at 31 December 2013        (29,442)   1,298  (244,840) (5,785)          - (5,785)

Statement of Cash Flow for the year ended 31 December 2013

                                                                2013        2012
                                                             US$'000     US$'000
                                                          (Unaudited)   (Audited)
Loss before tax                                              (13,341)     (6,203)
Adjusted for :
Depreciation and amortisation                                    536         589
Employment benefit expenditure (share-based payments)             48         158
Profit on disposal and scrapping of property, plant and         (541)        (54)
Impairment of inventory                                          381         595
Impairment of assets                                             224        1,218
Net loss on foreign exchange                                     121          38
Decrease in operating lease liability                               -        (11)
Sundry income                                                     (3)       (380)
Finance income                                                (1,159)     (1,331)
Finance costs                                                    954        1,019
Changes in working capital
Decrease in prepayments and other receivables                     38         401
(Increase)/decrease in inventory                                 (50)        470
Increase in trade and other payables                             890        1,699
(Decrease)/increase in provisions                               (510)        185
Cash flows used in operations                                (12,412)     (1,607)
Finance income                                                  (128)        324
Finance costs                                                    (21)        (13)
Sundry income                                                      3         380
Net cash used in operating activities                        (12,558)       (916)

Purchases of property, plant and equipment                      (953)       (227)
Proceeds from disposal of property, plant and equipment           20         287
Net cash used in investing activities                           (933)         60
Proceeds from issue of convertible notes                        6,890        -
Net cash from financing activities                              6,890        -

Net decrease in cash and cash equivalents                     (6,601)      (856)
Cash and cash equivalents at 1 January                         4,512      5,376
Effects of exchange rate fluctuations on cash balances         4,564         (8)
Cash and cash equivalents at 31 December                       2,475      4,512
Notes to the unaudited preliminary financial statements

1.     Basis of preparation

1.1.   Accounting Policies
This set of unaudited preliminary financial statements has been prepared in accordance with
the accounting policies as set out in the 2012 annual financial statements except for the

(a)    New and amended standards adopted by the Group

The Group has adopted the following new and amended IFRSs as from 1 January 2013:

In 2013 the Group adopted the amendments to IAS 1 'Presentation of Items in Other
Comprehensive Income', 'IAS 19 'Employee Benefits', IFRIC 20 'Stripping Costs in the
Production Phase of a Surface Mine', IFRS 7 'Disclosures – Offsetting Financial Assets and
Financial Liabilities' and IFRS 13 'Fair Value Measurement'. These have no significant
impact on the Group's net assets.

(b)    New standards, amendments and interpretations to not yet adopted

A number of new standards, amendments to standards and interpretations are effective for
annual periods beginning after 1 January 2013, and have not been applied in preparing these
consolidated financial statements. Those which may be relevant to the Group are set out
below. The Group does not plan to adopt these standards early.

The amendments to IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint
Arrangements', IFRS 12 'Disclosure of Interests in Other Entities', IAS 27 'Separate Financial
Statements' and IAS 28 'Investments in Associates and Joint Ventures' were endorsed by the
EU in December 2012, with an effective date of 1 January 2014 but with early adoption
permitted. The Group does not intend to adopt the new and revised standards from 1 January
2013. The adoption is not expected to have a significant impact upon the Group's net results,
net assets or disclosures.

The amendments to IAS 32 'Offsetting Financial Assets and Financial Liabilities' and IAS 36
'Recoverable amount disclosures for non-financial assets' were endorsed by the EU in
December 2012 (IAS 32) and December 2013 (IAS 36) respectively. The amendments are
effective for accounting periods beginning on or after 1 January 2014 but with early adoption
permitted. The adoption is not expected to have a significant impact upon the Group's net
results, net assets or disclosures.

The amendments to IAS 19 ‘Employee benefits’ are effective for accounting periods
beginning on or after 1 July 2014. The amendments have not yet been endorsed by the EU.
The adoption of the IAS 19 amendments is not expected to have a significant impact on the
Group’s net assets.

IFRS 9 ‘Financial Instruments’ was reissued in October 2010. It is applicable to financial
assets and financial liabilities. For financial assets it requires classification and measurement
in either the amortised cost or the fair value category. For a company’s own debt held at fair
value, the standard requires the movement in the fair value as a result of changes in the
company’s own credit risk to be included in other comprehensive income. It is effective for
accounting periods beginning on or after 1 January 2015. The standard has not yet been
endorsed by the EU. The adoption of IFRS 9 is not expected to have a significant impact
upon the Group’s net results or net assets.

In 2013, the Group met all the criteria of a mine being substantially complete and being
ready for its intended use and moved into the production stage. Therefore, in the current
financial year the revenue from the sale of gold is no longer disclosed as other income but as

1.2.   Going Concern

The financial information in this statement has been prepared on the going concern basis The
Directors have prepared the financial information on the going concern basis having
considered the current operations, the current funding position and the projected funding
requirements for the business for at least 12 months from the date of approval of the financial
statements as detailed below.
The Directors have prepared cash flow projections until 2024 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 these financial statements and
hence the Directors have prepared the financial statements on a going concern basis.

Following the US$7.25m investment by Redstone Capital,             the US$2m open offer and
Redstone Capital’s exercise of their option over additional shares in March 2014 for US$3.4
million, the directors consider that there is now adequate funding in place and, based on the
current mine plan, no further capital raises are considered necessary for the life of mine.

The injection of new funds means the Company is in a much better position than last year.
The Directors are optimistic about the future of the Company and the dewatering may give
the company improved access to deeper mining levels over time. However, the risks inherent
in any single metal mining operation remain for the longer term. In particular, the longer
term adequacy of the funding is dependent upon the successful upgrade of the plants and the
consistent availability of the metallurgical plant and machinery; no adverse movements to the
gold price; the renewal of mining licences; and, the successful operation of the government-
led dewatering plant to maintain the water level at the environmental critical level.

The financial information in this statement is unaudited and does not constitute full statutory
financial statements within the meaning of Companies (Guernsey) Law 2008

2.     Property, plant and equipment

                                                          2013                                2012
                                                      US$’000                              US$’000
Opening book value                                        4,485                              3,460
Exchange rates effects                                    (551)                                887
Additions                                                   839                                227
Disposals and Scrapping                                    (32)                               (21)
Change in rehabilitation                                   (90)                            (1,076)
Transferred to non-current                                (496)                                  -
assets held-for-sale
Reclassification                                             -                               1,597
Depreciation change                                       (536)                              (589)
Closing book value                                       3,619                               4,485

3.     Intangible Assets
                                                                        2013             2012
                                                                     US$'000          US$'000

 Opening book value                                                    3,874                -
 Exchange rate effects                                                 (743)            (140)
 Additions                                                                 -            4,014
                                                                      3,131            3,874
This represents cost of pumps donated to the Government treated as intangible right to benefit
from dewatering of the Central Basin.

4.     Inventories
                                                                        2013             2012
                                                                     US$'000          US$'000
Consumables                                                              130              331
Ore stockpiles                                                           780              909
Stationery and office consumables                                          -                1
                                                                         910            1 241

The amount of the write-down of ore stockpiles to net realisable value, and recognised as an
expense is US$380,785 (2012: US$595,441).

5.     Environmental Guarantee Investment
                                                                      2013             2012
                                                                   US$'000          US$'000

Balance at the beginning of the year                                4,003             4,058
Finance income earned during the year                                 197               212
Annual premiums paid                                                 (60)              (71)
Investment fees                                                      (24)              (20)
Exchange rate effects                                               (778)             (176)
Balance at the end of the year                                      3,338             4,003

During 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$3,894,160 (ZAR40,840,689) in the event of an
environmental rehabilitation programme.

6.     Loan Receivable
                                                                      2013             2012
                                                                   US$'000          US$'000

Balance at the beginning of the year                                 9,560            8,956
Interest for the year                                                  933            1,006
Exchange rate effects                                              (1,922)            (402)
                                                                     8,571            9,560

As part of the restructuring of the Group on 14 June 2007, the Group acquired a BBBEE
partner, Puno Gold Investment Proprietary Limited (‘Puno’). Under the Shareholder’s
Agreement dated 14 June 2007, Puno obtained a 26% share of Central Rand Gold South
Africa Proprietary Limited (“CRGSA”) and Central Rand Gold obtained the remaining 74%
of CRGSA (through its holding company Central Rand Gold Netherlands Antilles
(“CRGNV”)). Both Puno and Central Rand Gold committed to funding CRGSA by way of
shareholder loans to CRGSA, pro rata to their respective shareholdings. Central Rand Gold’s
share was ZAR111,196,279 and Puno’s share was ZAR39,068,963.

Puno’s share of the funding was paid by Central Rand Gold on its behalf. Therefore on 14
June 2007 Puno entered into a separate loan agreement with Central Rand Gold whereby
Central Rand Gold advanced a loan of ZAR39,068,963 to 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.

7.      Environmental rehabilitation and other provisions
                                                                         2013              2012
                                                                      US$'000           US$'000

Opening balance                                                         6,223             6,038
Charged to income statement                                               837             1,531
Charged to cost of assets                                                (90)           (1,076)
Used during the year                                                    (133)                 -
Exchange rate effects                                                 (1,124)             (270)
                                                                        5,713            6 223

Environmental rehabilitation
The Group’s mining and exploration activities are subject to extensive environmental laws
and regulations. These laws and regulations are continually changing and are generally
becoming more restrictive. The Group has incurred, and expects to make in the future,
expenditures to comply with such laws and regulations, but cannot predict the full amount of
such future expenditures. The provision is based on best estimates at the time of recognition.
All expenses that are provided for are based on current costs and third party quotations. The
future cash flows for the provision are adjusted to reflect an inflation factor based on the
latest economic analyst expectations of future rates. Estimated future rehabilitation costs are
based principally on legal and regulatory requirements. The Group is obligated to recognise a
provision due to the fact that development has commenced. The provision represents the
present value of rehabilitation costs relating to the mine site, which are expected to be
incurred over the life-of-mine which is currently up to the end of 2024. The major portion of
the rehabilitation costs included in the US$5 713 231 relates to open cast mining and is
discounted from 2024. The remaining portion of the rehabilitation costs relates to
underground mining that is discounted from 2024.

8.   Loans Payable

     (a) Puno Gold Investments Proprietary Limited
                                                                       2013             2012
                                                                    US$'000          US$'000
Balance at the beginning of the year                                  9,560            8,956
Interest for the year                                                   933            1,006
Exchange rate effects                                               (1,922)            (402)
                                                                      8,571            9,560

This is related to Note 6 Loan Receivable.

     (b) Redstone Capital Limited

The Company raised a gross $7.25 million through the issue of loan notes to Redstone
Capital with commission of $0.2 million. The cash proceeds represented $7.25m of non-
amortising convertible 8% loan notes due in 2016, warrants over 27 million ordinary shares
as a price of 8.78p and a three year option to acquire more shares following the open offer in
2014. The valuation of each financial instrument at inception and at 31 December 2013 is
given in the table below:

                                              Derivative         Derivative
                                                warranty       share option
                               Debt            liability          liability             Total
                            US$’000              US$’000            US$’000           US$’000
Balance        at
beginning of the
year                               -                   -                  -                 -
Transaction    at
inception                     5,204                1,627                419             7,250
Fair value loss
on revaluation at
year-end                      (412)                (193)                770               165
Interest for the
year                            356                    -                  -               356
Closing balance               5,148               1,434               1,189             7,771

The Loan Note Instrument was issued in two tranches, with the first tranche of US$3.5
million issued on 19 August 2013, and the second tranche of US$3.75 issued on 27
September 2013. These loan notes have a maturity of three years from the date of issue, and
bear a fixed interest rate of 8% per annum (paid quarterly). The notes also include additional
bespoke features, including:
      -   Investor’s option to convert loan into shares;
      -   Issuer’s option to convert 50% of each tranche;
      -   Issuer’s option to settle interest payments in shares;
      -   Issuer’s option to repay loan notes early;
      -   Issuer’s option of a five month interest rate holiday; and
      -   A conversion price (for the both the issuer’s and investor’s options) that is not fixed

9.        Reconciliation between basic loss and headline loss attributable to equity holders
          of the Group

                                                                   2012                    2012
                                                                   US$                      US$
Loss attributable to equity holders of the
Group                                                      (13,340,783)             (4,506,916)
Less: Profit on disposal of property, plant and
equipment                                                     (541,436)                (53,962)
Loss used in calculating headline loss per
share                                                      (13,882,219)             (4,560,878)

10.       Events occurring after reporting date
No material changes, other than the Open Offer to shareholders in January 2014 and
Redstone take up of shares as per the Option Agreement as discussed in the CEO report.

Issued on behalf of: Central Rand Gold Limited
Date: 16 May 2014

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