| Tue 17 Nov 2009, 9:00 | | CRD - Central Rand Gold Limited - Interim Management Statement |
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CRD
CRD
CRD - Central Rand Gold Limited - Interim Management Statement
Central Rand Gold Limited
("CRG" or the "Company)
(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 2007/019223/10)
ISIN: GG00B24HM601
Share code on LSE: CRND
Share code on JSE: CRD
INTERIM MANAGEMENT STATEMENT
HIGHLIGHTS
- Decline metre advancement surpasses expectations;
- Main Reef intersected via decline development;
- First stoping area opened for trial mining;
- Gold potential exposed in middling material as evidenced in surface
mining;
- Metallurgical processing of oxide material has been a challenge, but
positive progress is now being made; and
- Puno "urgent interdict" to stop operations dismissed with costs.
Johan du Toit, Chief Executive Officer of CRG, commented:
"CRG is making steady progress on a number of fronts, from the pouring of gold
on site, improving recoveries from the metallurgical process, through to
ramping up the underground development in advance of commercial production
early next year. It has been a hard journey to get to where we are today, yet
we are confident we have the business plan and the team to take CRG onto its
next phase of development."
For further information, please contact:
Central Rand Gold +27 (0) 11 551 4000
Johan du Toit / Patrick Malaza
Evolution Securities Limited +44 (0) 20 7071 4300
Simon Edwards / Chris Sim / Neil Elliot
Macquarie First South Advisers (Pty) Limited +27 (0) 11 583 2000
Thembeka Mgoduso / Annerie Britz /
Melanie de Nysschen / Manisha Ramlakhan
Buchanan Communications +44 (0) 20 7466 5000
Bobby Morse / Ben Willey / Katharine Sutton
Jenni Newman Public Relations (Pty) Limited +27 (0) 11 506 7300
Jenni Newman / Megann Outram
OPERATIONAL UPDATE
On 25 August 2009, the Board of Directors issued the following short to mid-
term operational targets as part of the June 2009 interim results:
1. Complete the trial mining operation;
2. Prove that the Snowden Resource to Reserve Report issued in August 2009
("Snowden Report") assumptions are robust and conservative in practice;
3. Demonstrate material production upside to the "base case";
4. Confirm the potential for significant improvements in metallurgical
recoveries;
5. Utilise the knowledge gained from trial mining to identify and develop
additional mining targets; and
6. Prove CRG can mine assets profitably.
Set out below is a progress update on the Company`s 6-Point Plan.
1. Complete the trial mining operation
The objective of the trial mining operation is to physically validate the main
mining and metallurgical methodology as described in the Snowden Report. The
results of the trial mining will be used to determine the future growth
strategy of the Company.
MINING
Surface mining
Surface trial mining has now largely been completed at the Company`s current
mining site. Both the Main Reef and the Main Reef Leader high grade reef zone
were mined at an average strip ratio of 1:9 for an estimated total of 40,000t
@ 4.4g/t Au for the quarter. Other surface target areas have been identified
in the Company`s current mining right area but their commercial viability will
only be assessed once underground trial mining has been completed.
Underground mining
As at the end of October 2009, the decline was an estimated 66m below surface
at a lateral distance of 474m from the portal. The development rate has
significantly improved since the introduction of Australian Contract Mining
("ACM") who are now averaging an outstanding 52m per week compared to a rate
of 20m per week prior to their commencement.
Ground conditions have improved significantly after mining through the
transition zone separating the shallow oxide and deeper sulphide zones. The
initially proposed trial blocks near-to-surface were abandoned due to poor
ground conditions. Several of the diamond drill holes identified unexpected
voids on the Main Reef where existing mine plans and data indicated solid
insitu blocks of ground. A comprehensive drilling programme is underway to
systematically drill out targeted mining blocks to ensure that planned future
blocks are free of unexpected mining voids. Drill results are appended at the
end of this report.
The latest cross cut accessed the old Level 5 where the Main Reef Leader was
mined out in the 1960s. The mine has now been divided into two sectors; east
and west. Two stoping blocks have been identified for trial mining, a 58m
stoping block on the west which has been exposed and a potential 80m stoping
block on the east. Trial stoping remains on schedule to begin in late December
2009.
ORE SORTING
In the Snowden Report it was assumed that the development ore would be
upgraded using conventional South African hand sorting. Recent tests have been
undertaken using optical sorter technology as applied with success at the
nearby Kloof Gold Mine. An 8kg sample of Main Reef and internal quartzite
(waste) was tested at the certified Mintek Laboratory in Johannesburg, South
Africa, with excellent separation results i.e. 90 per cent success in
waste/ore separation. Encouraged by the preliminary findings, a 30t bulk
sample will be processed through Mintek`s ore sorting pilot plant with results
expected in December 2009. Success in using this method has the potential to
significantly increase production and capture the majority of sweepings and
vampings (old gold) left behind.
METALLURGICAL UPDATE
Metallurgical equipment consists of crushing and concentrating
("concentrating") and Carbon-In-Leach ("CIL") plants.
The new Gekko 50tph concentrating plant was delivered to site on 16 October
2009. The plant has been assembled and commissioning will begin once there is
a need for additional capacity from the underground ore anticipated in 2010.
The Bateman 30tph concentrating plant ("Bateman plant") has operated above
design tonnage for sustained periods, however, overall availability, less than
18 hours per day, has been compromised by sensitivity to fluctuating feed and
consequent reliability of the vertical shaft impactor ("VSI"). A small
investment to reliably control and maintain the feed tonnage rates is being
engineered for implementation in early 2010.
The Bateman plant has achieved in excess of 70 per cent recovery on difficult
oxide material and this is a positive indicator of performance for when the
plant will process true sulphide underground ore from which the recovery
should be significantly higher.
During the current proof of concept phase and until production begins in
earnest, the Company has decided to suspend concentrating with the
operationally intensive Gekko 20tph plant. The Gekko 20tph plant has served
its intended purpose as a pilot plant for metallurgical testing as well as to
provide insight into the final design of the Gekko 50tph concentrating plant.
Up to the end of September 2009, mainly oxide material has been treated by the
concentrating and CIL plants. The CIL plant was commissioned at the end of
June 2009 and started operating on a 24/7 basis in late September 2009. The
CIL plant processed approximately 7,500t at an estimated grade of 9g/t for the
quarter with gold production of only 193oz. In early October 2009, the Company
engaged Mr PG Hurter an experienced metallurgist with over 20 years`
experience with mining companies in South Africa and Australia, to lead a
review of CRG`s current metallurgical processes and address the low recovery
rate. Findings from his investigation include:
- An initial review indicates that there are no fundamental flaws with the
metallurgical plants;
- A finding that carbonaceous material including fly ash from ash dumps now
identified over the surface mining slots, has contaminated the oxide
material processed to date and blocked gold recoveries. A 0.1 per cent
carbon content in the feed has been tested to result in an increased
tailing of >1g/t. This is technically termed "Preg Robbing" and has been
mitigated now by the addition of a carbon blocker. CIL tails are now
consistently between 0.25 g/t and 0.6 g/t indicating a recovery in excess
of 90 per cent. This unexpected "Preg Robbing" is limited to the surface
oxide material and will not be a factor with the underground sulphides to
be exclusively mined in 2010; and
- A finding that previous start-up concentrator tails carrying grade up to
2g/t will be recovered and processed directly into the CIL -
approximately 40,000t with an expected recovery of 1,800oz.
In addition the following improvements to the metallurgical process have been
identified and are being implemented:
- Automation of gravity recovery and additional pumping and screening to
prevent spillages of concentrate.
- Sampling techniques and methodology, and metal accounting procedures, to
better understand and manage gold recovery.
CRG`s estimated stockpiles and grades as at end September 2009 are as follows:-
- Run of Mine ("ROM") oxidised surface material of 14,000t at 3.9g/t;
- ROM underground development sulphide ore of 2,000t at 5.8g/t; and
- Concentrate of 7,700t at 6 g/t still to be processed through the CIL.
2. Prove that the Snowden Report assumptions are robust and conservative in
practice
An update on key assumptions contained in the Snowden Report is provided in
the table below:
Assumption
included the
Snowden Report Progress to date
Gold price US$900 US$1129
Exchange rate ZAR8.00 ZAR7.47
Met recovery 80 per cent Will be tested once underground
ore is available from stoping,
which is expected in early
2010. Seventy per cent recovery
results on difficult oxide
material treated to date give
the Board confidence that
recovery in excess of 80 per
cent is achievable.
Average head grade 4.2g/t Reef driving underway (expect
representative results in
December 2009). The Snowden
Report assumed no grade would
occur within the middling,
resulting in a mining dilution
factor of 30 per cent. Some
areas of the quartzite
separating the Main Reef from
the Main Reef Leader in mined
slots contained gold grades
(0.8 g/t to 3.7 g/t) over its
width, which, if encountered in
the underground mining
operations will have important
positive implications during
the upcoming trial mining.
Sweepings and vamping NIL Sweepings and vampings have
been identified in the trial
mining area, but it is too
early to quantify these
materials.
Cash cost (operating cost) US$580/oz Still too early to validate any
changes in assumptions.
Capital costs US$220/oz Too early to confirm, however,
waste development is in line
with the Snowden Report.
Decline development is
estimated at US$1,137/m. CRG is
currently achieving US$1,166/m
(excluding labour and equipment
costs).
3. Demonstrate material production upside to the "base case"
A definitive update for this objective will only be available once trial
mining has been completed.
4. Confirm the potential for significant improvements in metallurgical
recoveries
Trial processing of underground sulphide ore will commence in early 2010.
5. Utilise the knowledge gained from trial mining to identify and develop
additional mining targets
The Dr Lemmer model is currently being reviewed to identify the next potential
mining areas.
6. Prove CRG can mine assets profitably
Trial mining in progress to date has not identified any significant variations
to the original assumptions contained in the Snowden Report that would
negatively impact the future profitability of the Company.
OTHER PERTINENT COMPANY MATTERS
Cash Position
As at the end of September 2009, the Company had approximately US$22.87m on
hand.
The breakdown of the cash spends can be analysed as follows:
Cash reconciliation Value US$ million
Balance as at 30 June 2009 46.40
Capital expenditure -9.90
Operational and administrative expenditure -12.84
Working capital -1.60
Foreign exchange gain 0.40
Interest 0.22
Gold sales 0.19
Balance as at 30 September 2009 22.87
The cash balance at 30 October 2009 is US$19.3m. CRG is not expecting to incur
any significant capital expenditure during the last quarter of 2009. Gold
revenue is lower than anticipated but is expected to increase over the next
quarter. CRG is currently pursuing various funding options for essential
mining equipment as well as for the water pump station that will be required
over the next few months. CRG expects to conclude these discussions by mid
December 2009. The success of these negotiations will determine the timing and
quantum of the next equity fundraising.
Black Economic Empowerment
The arbitration procedure is continuing with Puno Gold Investments (Pty)
Limited ("Puno"). It is expected that the arbitration proceedings will be
completed during 2010.
In a separate matter, Puno brought an urgent interdict against Central Rand
Gold South Africa (Pty) Limited ("CRGSA"), CRG`s operating company, to stop
the Company from progressing on what Puno refers to as "full scale mining".
The urgent interdict was heard on 5 November 2009 by the South Gauteng High
Court. The Company is pleased to report that the urgent interdict sought by
Puno to halt the Company`s trial mining operations was dismissed. In addition,
Puno is required to pay all legal costs associated with this dispute.
APPENDIX 1- DRILL RESULTS
Diamond drilling has continued during the reporting period, although the focus
of the drilling has been to target areas of unmined Main Reef and delineate
areas where mining voids occur. Previously unreported drilling results from
the CMR area are tabulated below:
CW
Borehole Grade (corr)
Name X 29 Y 29 From To (g/t) (cm) Comment
DDCMR_03_04 -2898823 -106518 64.85 65.95 4.52 110 Cavity on
Main Reef
Leader
Evaluation
DDCMR_07_04 -2898898 -106443 78.46 81.48 2.76 302 Cavity on
Main Reef
Leader
Evaluation
DDCMR_55_00 -2899236 -105360 140 Dyke Terminated
in Dyke
DDCMR_80005 -2899095 -105930 35.67 38.3 7.44 208 Single Reef/
Value Zone
DDCMR_80006 -2899098 -105951 46.73 49.2 1.9 195 Incomplete
Core at Main
Reef
Elevation/
Single Value
Zone
DDCMR_80007 -2899079 -106018 19 Aband Hole
Abandoned
DDCMR_80008 -2899099 -106034 68.68 69.95 Cavity at
Main Reef
and Main
Reef Leader
Elevation
DDCMR_80009 -2899093 -106031 67.31 69.81 8.04 198 Cavity on
Main Reef
Leader
Elevation
DDCMR_80010 -2899084 -106025 61.81 62.49 Cavity at
Main Reef
and Main
Reef Leader
Elevation
DDCMR_80011 -2899095 -106056 76.43 76.95 Cavity at
Main Reef
and Main
Reef Leader
Elevation
DDCMR_90001 -2898777 -106635 80.1 80.91 Single reef/
Value Zone
Cavity
DDCMR_90002 -2898826 -106583 104.76 106.34 Single reef/
Value Zone
Cavity
DDCMR_90003 -2898716 -106691 66.04 67.45 Cavity at
Main reef
and Main
Reef
Elevation
DDCMR_90003b -2898716 -106691 74.71 75.2 8.67 39 Cavity on
Main Reef
Leader
Elevation
DDCMR_90004 -2898708 -106757 83.88 84.67 0.74 79 Cavity on
Main Reef
Leader
Elevation
DDCMR_90004b -2898708 -106757 94.86 97.57 Single reef/
Value Zone
Cavity
DDCMR_90005 -2898637 - 89.55 89.68 Cavity at
1066859 Main Reef
and Main
Reef Leader
Elevation
DDCMR_90005b -2898637 -106859 101.96 104.05 Single Reef/
Value Zone
Cavity
DDCMR_90006 -2898627 -106906 81.21 82.95 8.42 174 Single Reef/
Value Zone
DDCMR_90006b -2898627 -106906 79.18 80.45 Single Reef/
Value Zone
Cavity
DDCMR_90007 -2898605 -106967 85.3 87.06 5.81 176 Single Reef/
Value Zone
DDCMR_90007b -2898605 -106967 104.51 106.17 Single Reef/
Value Zone
Cavity
DDCMR_90008 -2898559 -107014 80.41 82.02 Cavity at
Main Reef
and Main
Reef
Elevation
DDCMR_90008b -2898559 -107014 96.57 98.21 1.87 130 Single Reef/
Value Zone
17 November 2009
Johannesburg
Sponsor
Macquarie First South Advisers (Pty) Ltd
Date: 17/11/2009 09:00:03 Produced by the JSE SENS Department.
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