| Thu 29 Apr 2010, 9:23 | | CRD - Central Rand Gold Limited - Annual report release |
|
CRD
CRD
CRD - Central Rand Gold Limited - Annual report release
Central Rand Gold Limited
(Incorporated as a company with limited liability under the laws of Guernsey,
Company Number 45108)
(Incorporated as an external company with limited liability under the laws of
South Africa, registration number 2007/0192231/10)
ISIN: GG00B24HM601
Share code on LSE: CRND
Share code on JSE: CRD
("CRG" or the "Company" or the "Group")
ANNUAL REPORT RELEASE
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 2010 annual general meeting to be held on 28
June 2010 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 the registered office) at
11.00 a.m. UK time on 28 June 2010. Shareholders wishing to participate in
the AGM, in Guernsey via video link from London may do so at the offices of
Hunton & Williams, 30 St Mary Axe, London EC3A 8EP and Shareholders 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,
Johannesburg.
HIGHLIGHTS
- Trial mining successfully completed
- Receipt of the Snowden Mining Industry Consultants ("Snowden") Report
dated 19 August 2009 and issue of first resource - reserve conversion
statement; further updated by the Snowden Report dated 12 April 2010
- Key management appointments
- Appointment of mining contractors, Australian Contract Mining ("ACM")
- Commissioning of metallurgical plants and smelting of first gold
- Implementation of local economic development initiatives and community
programmes
CHAIRMAN`S REPORT TO SHAREHOLDERS
In this, my first annual Chairman`s Report to shareholders, having taken over
as Chairman upon Alastair Walton`s retirement on 14 April 2010, it is
important to examine and reflect on the critical realignment and refocusing
strategies and processes the Company has undertaken and adopted to safeguard
its future in a challenging financial and operational environment. Although I
was on the Board for the whole of 2009, given the historic nature of this
report, Alastair Walton has also agreed to sign this report as outgoing
Chairman.
While 2008 was a year of some major firsts - especially the awarding of our
first New Order Mining Right - the emphasis in 2009 was much more on re-
scoping our activities, optimisation and management of resources and
facilities to best deal with the realities that we faced as we moved from the
conceptual to the physical, and consequently firming up our business case.
Without doubt, 2009 was a difficult year for our Company against a backdrop
of economic and financial market instabilities and uncertainties all around
the world. The fact that we have ultimately been able to move to the trial
mining and processing phase of our development is testimony to the spirit
that is embedded in CRG`s people.
Under the new management team, led by our Chief Executive Officer (CEO) Johan
du Toit, significant advances were made during 2009, especially from a
technical point of view. Don Harper (Head of Mining) and Keith Matier (Head
of Geology) have strengthened the team through their experience and
expertise, which is now being leveraged to speed up CRG`s transition from
trial mining to commercial mining. Complementing the skills of the new
management team was the appointment of ACM, whose expertise in mechanised
underground mining and development - including long-hole stoping - is proving
to be a major improvement on the contract mining arrangement that was
previously in place.
While 2009 was disappointing from a production point of view, with gold
output 40,000 ounces lower than originally anticipated (mainly due to the
difficulties that necessitated a change in mining contractor), improvements
in metallurgical processes towards the end of the year bode well for 2010.
Additional Funding
As was stated in the Company`s 2007 prospectus, there was a clear intention
to raise further capital during 2009 for proof of concept and development
purposes. Due to the global economic down turn that took place, it was deemed
preferable to batten down the hatches and use the funds the Company had to
focus on proof of concept - i.e. trial mining and processing; and then to
seek further funding during 2010 in order to move into the production phase
of CRG`s evolution.
The share placement that was announced on 22 January 2010 raised a total of
US$6 million through a cashbox structure to existing shareholders, and to
Directors and senior management. We are thankful that shareholders
demonstrated sufficient confidence in CRG to support this exercise.
These funds were specifically raised to provide sufficient working capital to
enable underground trial mining to be completed and the viability of the
proposed mine plan to be proven, both vital pre-cursors to taking the next
logical step into commercial mining, and to providing technical and
operational detail to support further funding.
As was announced at the time of the cashbox placing in January 2010,
additional equity finance of at least US$35 million will soon be sought to
fund the Company`s mine development plan and provide the platform for
sustainable gold production going forward. It was considered prudent by the
Board to only seek this capital once trial mining had been completed and the
results of these trials had been documented by Snowden, hence considerably
"de-risking" the next phase in our development.
Community Involvement
CRG has always been about much more than just mining. From its beginning,
there has been a genuine desire and commitment towards uplifting communities
and improve the quality of life of thousands of people in the areas where our
mining operations take place. Bringing tangible benefits to communities has
been a targeted priority, not merely a by-product of our core activity.
In this regard, it has been rewarding for the Company to become intimately
involved in local economic development projects - such as helping in the
start-up of a large number of small businesses - and facilitating a range of
important education projects aimed at improving school leaving pass rates and
assisting university students. Further details of these vital interventions
are available further on in this report. CRG has ensured, through various
proactive initiatives, that its presence as a miner has broader ongoing
benefits for the society in which it operates.
Board Changes
On the completion of trial mining and the release of the updated CPR (14
April 2010), the Company believed it was an appropriate moment to bring
forward the previously stated Board changes detailed in the announcement
dated 22 January 2010. I took over the Chairmanship to lead the Company
through its next phase of development. Accordingly, Alastair Walton and
Robert Kirkby resigned from the Board with immediate effect. Other Board
changes reported on this day included Miklos Salamon succeeding Robert Kirkby
as a senior Independent Non-Executive Director and Jerome Brauns and Patrick
Malaza being appointed to the Board as a Non-Executive Director and Finance
Director, respectively. Jerome, who is a prominent Advocate, has assisted the
Company with legal matters in the past and will be a considerable asset on
the Board. It is intended that he be appointed Chairman of Central Rand Gold
South Africa (Pty) Limited ("CRGSA"), succeeding me in this position. Patrick
has been the Chief Financial Officer since 1 July 2009.
The newly constituted Board would like to thank Alastair and Robert for their
guidance and vision which have been invaluable to CRG progressing to where it
is today.
Thanks
CRG has come a long way since its listing in 2007 and has seen a lot of
changes to both its personnel and its strategy, during this time. I believe
it is now well positioned to convert from trial mining to sustainable
commercial mining, validating the promise and potential that has always been
evident.
My heartfelt thanks go to all of my fellow Board members and to the
management and staff of CRG who have worked tirelessly, often in difficult
circumstances, to advance the Company towards reaching its undoubted
potential.
I am confident that CRG has the right team in place to move forward into full
scale commercial gold mining and carve out a niche as a sustainable producer
in years to come.
Michael McMahon
Chairman (from 14 April 2010)
Over the past few years, I have enjoyed an interesting and rewarding journey
with CRG and it has indeed been a privilege to have been so intimately
involved with such a unique mining project. I have come into contact with
some fantastic people during this time - within CRG and within the
communities where the Company`s projects are located. Importantly, I have
been able to learn a lot about South Africa and its people. My thanks go out
to all involved in CRG during my time as Chairman. I wish you all the best
for the future.
Alastair Walton
Outgoing Chairman who retired on 14 April 2010
Chief Executive Officer`s Report
Introduction
2009 was a difficult year for Central Rand Gold ("CRG"). The investment
landscape turned very negative owing to the global liquidity crisis. This
scenario compromised CRG`s original operational plans as envisaged during its
2007 Initial Public Offering, of raising a further US$156 million to
establish its mining operation. In addition, it became clear during 2009,
that both operationally and managerially many changes were necessary within
CRG in order to effectively and economically deliver a viable and sustainable
mining business. Given this combination of factors, the year was used to plan
and execute these many changes, and to work towards substantially de-risking
the project by completing trial mining and processing with a view to having
sound technical data and experience upon which a capital raising in 2010
could be based - and to endeavour to do this within the existing cash
resources of CRG.
Cash preservation
The focus of cash preservation was to realign and re-prioritise the Company`s
cash spend, to ensure it had sufficient funds available to complete all trial
mining objectives. Any spend that did not assist in achieving these
objectives was, where practical, eliminated from the cost base. Consequently,
CRG implemented: staff redundancies; termination of non critical outsourcing
agreements; re-scoping of development activities by reducing from three
planned declines to one; replacement of underperforming mining contractors;
any exploration work, shaft re-access and other programmes that were not
immediately necessary were temporarily halted; new major sponsorships were
curtailed; and stringent controls were placed on staff and office expenses.
These strategies, together with the January 2010 cashbox fund raising, have
proven to be effective, with the Company being able to complete its trial
mining objectives by the end of the first quarter 2010.
Exploration and Geological Update
In mid 2009, diamond-drilling focus shifted from more regional exploration
and resource drilling of secondary reef targets, to focused systematic
diamond drilling ahead of the developing decline in and around the potential
footprint of the second decline. The focus of these holes was as much to
evaluate ground conditions and mining block availability ahead of mining, as
it was to obtain grade information.
Exploration trenching conducted during 2009 and continued through 2010, has
identified substantial potential for open pit mining in and around the
current footprint of the underground mining operation.
During the resource evaluation drilling phases, independent quality control
audits were regularly undertaken on the various analytical laboratories used,
as well as on the drilling database itself.
Quality control and assurance procedures for the drilling in the decline area
are currently being undertaken internally.
Reserve Conversion
An essential component for a successful mining project is confirmation of the
Ore Reserves in the ore about to be mined. This has been recorded in the
release of the maiden independent resources-to-reserves conversion report
signed-off by Snowden Mining Industry Consultants (Snowden), indicating an
initial Australasian Joint Ore & Reserve Committee ("JORC") and South African
Mineral Resources Committee ("SAMREC") compliant Probable Reserve of 271,000
ounces of gold (2.06 million tonnes at 4.1g/t). This estimate was based
solely on two well-defined pay channels in the Main Reef on a portion of the
Consolidated Main Reef ("CMR") tenement. In this report, Snowden confirmed
that the mining method and mine plan are suitable to develop an economic mine
- without the inclusion of any additional revenue which may arise from
sweepings, vampings, Main Reef Leader pillars, auriferous parting and surface
material. Snowden have updated this estimate to a revised JORC and SAMREC
compliant Probable Reserve of 482,000 ounces of gold (3.73 million tonnes at
4.0g/t) as at 12 April 2010.
Trial Mining
In early 2009, CRGSA commenced a programme of underground trial mining on the
Main Reef at CMR. The key objectives were to demonstrate that the mining
method is appropriate, that the Main Reef can be safely and efficiently mined
and that the reserve modifying factors are reasonable.
Decline and Reef Development
A decline from a portal at Slot 8 is being developed to access the two pay-
shoots in the initial mining area at CMR.
The Slot 8 decline is approximately 125 metres below surface with 810 metres
of decline development completed to date. In addition, 440 metres of on reef
development and crosscuts have been developed. In total 1,250 metres of
development has been completed with a single double boom jumbo. Since the
appointment of ACM, rates of 240 metres per month have regularly been
achieved.
Stoping
Three stopes have been successfully blasted and extracted using mechanised
long hole stoping and three Cemented Aggregate Fill ("CAF") support pillars
have been poured. This simple, but highly productive mechanised mining
technique, is common in Australia but new to the Witwatersrand.
Hanging wall conditions experienced to date have been good and no abnormal
roof support structures have been required.
No damage occurred to CAF pillars or the hanging wall after stope blasting
and subsequent extraction of blasted material.
One of the stopes was successfully split-fired to separate low grade parting
from the Main Reef and extract these strata separately. The split-firing of
low grade parting ore from the Main Reef ore gives flexibility on a stope-by-
stope basis, to either split-fire, or to take the entire package (Main Reef,
parting and the sweepings and vampings lying on the parting), depending upon
grade.
These trials have also demonstrated that:
- 90% of blasted stope material is recovered by the loader on the level
below. The 10% of broken stope ore left behind after blasting is confirmed
to
be amenable to water jetting; and
- Roof support using split sets and mesh allows for safe and economic
mining.
Processing
It has been recognised that gold output is maximised by the most effective
utilisation of the 18,000 tonne per month Carbon-in-Pulp ("CIP") plant. To
improve recovery and reduce costs the plant has been reconfigured to separate
the feed into two streams, with the higher grade stream directed to an
upgraded CIP plant and the lower grade material directed to the existing
flotation plant. Optical sorting has also been trialled and will be added to
the plant flow sheet.
Result of Optical Sorting Trials
On reef development the optical sorter rejects 50% of the material fed to it
whilst recovering 85% of the reef, with a reduction in dilution resulting in
an uplift from an estimated 1.5 g/t to 3 g/t.
For stoped ore the optical sorter will be used to separate a high grade
stream to be sent direct to the CIP plant from the low grade flotation
circuit stream.
Safety
Since the Company`s inception in 2006, we at CRG have placed a major emphasis
on safety in everything that we do, throughout our operations. There is never
room for complacency, and we are always striving to maintain an accident and
injury free environment in an industry which is more dangerous than most.
During 2009, CRG moved from the exploration to the development phase, with an
increase in workforce and risk exposure. The mining method ensures that
employees are not exposed to an unsupported roof in new or old workings, at
any time. The underground workforce, under the leadership of ACM, is focused
on achieving world class safety outcomes.
The following are the safety statistics:
Type of injury 2009 2008
Dressing Cases 9 5
Lost Time Injuries 5 -
Incidents 41 5
There were no fatalities during 2009.
Maintaining safety at our operations will continue to be at the heart of all
of our activities, as we move into our commercial mining phase.
Water
After an unfortunate double fatality, East Rand Proprietary Mines (part of
the DRD Gold Limited Group) ceased pumping water from its SWV shaft. This
pump station had served the purpose of maintaining the water level in the
Central Rand Basin, in which CRG sits.
By the end of 2008, the water had flooded the pump station. The water in the
basin continues to rise at an average of 0.54m per day and as at 31 December
2009 was at approximately 671m below the surface.
Murray and Roberts Limited developed various engineered options for the
establishment of a pump station at various depths. The immediate target is to
stop the water table at 400 metres below surface ("mbs"), whereafter the
basin can be dewatered further.
Based on the above engineering study, the capital cost is estimated to be
ZAR178 million at 400mbs. It has been estimated that the pump station will
cost ZAR91 million and the HDS plant will cost ZAR87 million.
The Department of Water Affairs ("DWA") and the CEO`s of the various mines in
the Western and Central Basins met on 26 March 2010 to discuss short term
solutions to the acid mine drainage problem. At this meeting DWA and Industry
agreed to support the submersible pump station solution financially as this
solution will solve:
- Government`s environmental concerns and is also interested in a supply
of clean water;
- DRD has an interest in a supply of water to its ERGO mine tailings
retreatment operations;
- CRG obviously wishes to protect its underground workings; and
- Peripheral mines who currently decant from the adjoining West and East
Rand Basins into the Central Basin need this Basin to continue pumping.
Final negotiations are expected to be concluded by May 2010.
Cash Position
As at the end of December 2009, the Company had approximately US$15.9 million
on hand. Set out below is an abridged cash flow statement.
Cash and cash equivalents at beginning of year US$`000
Cash and cash equivalents at beginning of year 69 601
Cash used in operations (42 716)
Interest received 2 899
Finance costs (83)
Sundry income 2
Mine property, plant and equipment (27 996)
Security deposits (221)
Repayment of borrowings (36)
Effects of exchange rate movement on cash balances 14 449
Cash and cash equivalents at end of year 15 899
Capital Raising
On 22 January 2010, we successfully placed a total of 24,691,964 new ordinary
shares of 1p each (GBP0.01) in the capital of the Company (the "Placing
Shares") at a price of 15p per share (GBP0.15) to raise GBP3.7 million
(US$6.0 million) (the "Placing"). The Placing was supported by the Directors,
senior management and certain existing substantial shareholders. About
23,781,964 Placing Shares were placed using the cashbox structure with
existing investors, and 910,000 Placing Shares were placed with Directors and
senior management of the Company. The Placing Shares represented 9.99% of
CRG`S existing ordinary share capital prior to the Placing and 9.09% of the
issued share capital, as enlarged by the Placing. The Placing price of 15p
per share represented a discount of 4.76% to the closing mid-price on 21
January 2010, of 15.75p per share. The Placing was underwritten by Evolution
Securities Limited (Evolution). As indicated in the Chairman`s Report, it is
envisaged that additional equity finance of at least US$35 million will be
sought to fund the Company`s mine development plan and provide the platform
for sustainable gold production going forward.
Black Economic Empowerment (BEE)
Significant activity took place during the year regarding the Company`s Black
Economic Empowerment (BEE) shareholding. Events that took place can be
summarised as follows:
Date Event
16 February 2009 Central Rand Gold Netherlands Antilles NV ("CRGNV"),
giving the requisite 90 days` notice as stipulated under
the CRGSA Shareholders` Agreement, exercised the call
option granted to it to acquire Puno Gold Investments
(Pty) Ltd`s (Puno) entire interest in CRGSA (the Call
Option).
7 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 Option pending the
final determination, by arbitration, of the validity and
enforceability of: 1) the various funding calls made by
CRGSA, under the auspices of the CRGSA Shareholders`
Agreement, for Puno to make its pro rata contribution to
funding requirements ; and the consequent Call Option
and; 2) the interpretation of the shareholder funding
provisions of the Shareholders` Agreement.
June 2009 CRG was informed that Puno had complained to the
Financial Services Board averring that CRG had made
false statements in its listing prospectus and further
continued to issue false information to its
shareholders.
9 September 2009 Application was made seeking to interdict CRGSA from
proceeding with mining operations at its Consolidated
Main Reef, Langlaagte, City Deep and Crown Mines
tenements, pending the final determination by
Arbitration Award or Court Order of the interpretation
of the provisions of the Shareholders` Agreement entered
into between Puno and CRGNV in respect of CRGSA, which
provide for the completion of, and timeframe within
which, a Bankable Feasibility Study is to be prepared in
respect of the anticipated mining of the Tenements. The
matter, which was initially scheduled to be heard on 13
October 2009, was postponed to 5 November 2009.
5 November 2009 At the hearing of the interdict applications, the Court
dismissed Puno`s request for an urgent interdict to halt
CRG`s trial mining activities and made a costs order
against Puno to pay the costs incurred by the CRG Group
in opposing the application. Puno subsequently indicated
that they intend to appeal this decision and intend to
do so once the formal Court Order is made available.
25 November 2009 CRG is advised that at a meeting held on 24 November
2009, the Financial Services Board rejected the
complaint lodged by Puno that CRG had made false
statements in its listing prospectus and continued to
issue false information to its shareholders.
1 April 2010 Court rejects Puno application for leave to appeal the
decision handed down by the South African High Court on
5 November 2009.
Currently, pre-arbitration formalities are being finalised in regard to the
arbitration between CRG and Puno, in relation to inter alia the validity of
the Call Option.
Environmental, Social and Labour, and Corporate Social Investment
CRG is fully committed to implementing highly effective and proactive
Environment, Social and Labour strategies and programmes.
Considerable progress was made in all of these areas during 2009, laying the
ideal foundation for further tangible advancements in 2010.
Details on all of these activities - including the George Harrison Park
training centre, the Amathuba (industrial hive) local economic development
initiatives, and education projects covering bursaries, a school achievers`
programme and an inter-school soccer tournament in Soweto - are available
later on in this annual report.
Prospects
During 2009 the Company made significant progress towards becoming a
sustainable commercial producer of gold. The first quarter of 2010 was vital
in confirming the Company`s mining methodologies and operations, and has
provided a strong platform from which to deliver a stable, sustainable, cash
positive operation.
CRG`s focus for the remainder of 2010 will be to raise the additional funds
it requires to commence commercial gold production and to continue with
exploration activities to identify future mining areas. CRG is now well
positioned to transition from trial mining to full-scale commercial
production.
The Company expects to achieve a production capacity of 45,000 oz per year by
2013. Expansion into other tenement areas will follow the process of
replicating the current technology and methods (as optimised in the trial
mining). Such expansion could be funded from retained earnings, debt, further
new capital, or a combination of these, according to the wisdom of the
moment.
Word of thanks
I would like to pay special tribute to Alastair Walton (former Chairman) and
Robert Kirkby (former Non-Executive Director), for the significant role they
have played in setting the direction and putting CRG on the right platform,
for future take off. My sincere thanks must also go to everyone - staff,
shareholders, contractors, community members and other stakeholders - who
played a role in getting the Company and the rest of the Group, to where they
are today.
Johan du Toit
Chief Executive Officer
GROUP AND COMPANY STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2009
AND 31 DECEMBER 2008
Group Company
2009 2008 2009 2008
Notes US$`000 US$ US$`000 US$ `000
`000
NON CURRENT ASSETS
Property, plant and equipment 2 34,298 10,458 - -
10,458
Intangible assets 3 1,316 - - -
Investment in subsidiaries - - 9,776 8,174
Security deposits and 5,806 4,637 203 172
guarantees 4,637
Loans receivable 4 7,818 5,205 209,936 84,350
5,205
49,238 20,300 219,915 92,696
20,300
CURRENT ASSETS
Security deposits and 510 1,458 382 404
guarantees
Prepayments and other 5,272 5,332 164 152
receivables
Inventory 1,574 732 - -
Cash and cash equivalents 15,899 69,601 8,847 66,089
Non-current assets held for 5 2,750 - - -
sale
26,005 77,123 9,393 66,645
TOTAL ASSETS 75,243 97,423 229,308 159,341
EQUITY
Attributable to equity
holders of the parent
Share capital 5,023 5,023 5,023 5,023
Share premium 191,406 191,406 191,406
191,406
Share-based compensation 27,482 26,429 27,482 26,429
reserve
Treasury shares (2) (4) - -
Foreign currency translation (28,400) (49,404)
reserve (42,900) (66,203)
Accumulated profits/(losses) (138,825) 54,640 2,391
(92,490)
56,684 87,464 229,147 159,046
Non controlling interest - - - -
TOTAL EQUITY 56,684 87,464 229,147 159,046
NON CURRENT LIABILITIES
Environmental rehabilitation 1,434 244 - -
and other provisions
Loan payable 4 7,818 5,205 - -
Operating lease liability 26 41 - -
Borrowings 12 46 - -
9,290 5,536 - -
CURRENT LIABILITIES
Trade and other payables 7,620 3,758 161 295
Environmental rehabilitation 701 324 - -
and other provisions
Taxation payable 895 310 - -
Operating lease liability 26 2 - -
Borrowings 27 29 - -
9,269 4,423 161 295
TOTAL LIABILITIES 18,559 9,959 161 295
TOTAL EQUITY AND LIABILITIES 75,243 97,423 229,308 159,341
GROUP AND COMPANY INCOME STATEMENT FOR THE YEARS ENDED 31 DECEMBER 2009
AND 31 DECEMBER 2008
Group Company
2009 2008 2009 2008
Notes US$`000 US$`000 US$`000 US$`000
Other income and gains 7,598 252 32,177 6,093
Employee benefits expense (9,688) (7,809) (61) -
Directors` emoluments 6 (1,676) (9,830) (874) (4,576)
Depreciation and (2,479) (1,210) - -
amortisation
Inventory write down (1,947) - - -
Operating lease expense (833) (809) (47) (189)
Exploration expenditure (33,696) (20,310) (393) (200)
Other expenses (5,956) (6,043) (1,582) (3,089)
Operating profit/(loss) (48,677) (45,759) 29,220 (1,961)
Interest receivable 3,996 7,051 23,029 14,926
Finance costs (1,108) (853) - -
Profit/(loss) before income (45,789) (39,561) 52,249 12,965
tax
Income tax expense (546) (218) - -
Profit/(loss) for the year (46,335) (39,779) 52,249 12,965
Loss is attributable to:
Non controlling interest - -
Equity holders of the (46,335) (39,779)
parent
(46,335) (39,779)
Loss per share for loss
attributable to the equity
holders during the year
(expressed in US cents per
share)
Basic loss per share (18.77) (16.21)
Diluted loss per share (18.77) (16.21)
GROUP AND COMPANY STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31
DECEMBER 2009 AND 31 DECEMBER 2008
Group Company
2009 2008 2009 2008
US$`000 US$`000 US$`000 US$`000
Profit/(Loss) for the year (46,335) (39,779) 52,249 12,965
Other comprehensive income:
Exchange differences on 14,500 (33,588) 16,799 (58,189)
translating foreign
operations
Income tax relating to - - - -
components of other
comprehensive income
Other comprehensive income 14,500 (33,588) 16,799 (58,189)
for the period, net of tax
Total comprehensive income (31,836) (73,367) 69,047 (45,224)
for the period
Total comprehensive income
is attributable to:
Non controlling interest - - - -
Equity holders of the (31,836) (73,367) 69,047 (45,224)
parent
(31,836) (73,367) 69,047 (45,224)
GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED 31
DECEMBER 2009 AND 31 DECEMBER 2008
Attributable to equity holders of the Parent Company
Group Ordinary Share Share Premium Share Based Treasury
Capital Compensation Shares
Reserve
US$`000 US$`000 US$`000 US$`000
Balance at 31 (31)
December 2007
Total 5,017 191,406 18,153
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:
Treasury shares (6)
issued to
Employee Share
Trust
Treasury shares 6 - - 33
issued to
Directors and
employees
Share-based - - - -
payments:
Employees and
Directors shares
and options
Balance at 31 - - 8,276 (4)
December 2008
Total 5,023 191,406 26,429
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 2
payments:
Employees and
Directors shares
and options
Balance at 31 - - 1,053 (2)
December 2009
5,023 191,406 27,482
GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED 31
DECEMBER 2009 AND 31 DECEMBER 2008 (continued)
Attributable to equity holders of the Parent Company
Balance at Foreign Accumulated Total Non Total
31 December Currency Losses Controlling Equity
2007 Translation Interest
Reserve
US$`000 US$`000 US$`000 US$`000 US$`000
Total (9,312) (52,711) -
comprehensive 152,522
income for
the year
Loss for the 152,522
year
Other - (39,779) -
comprehensive (39,779)
income
Foreign (39,779)
currency
adjustments
Transactions (33,588) - -
with owners, (33,588)
recorded
directly in
equity
Employee (33,588)
Share Option
Scheme:
Treasury
shares issued
to Employee
Share Trust
Treasury - - - -
shares issued
to Directors
and employees
Share-based - - 33 - -
payments:
Employees and
Directors
shares and
options
Balance at - - 8,276 - 33
31 December
2008
Total (42,900) (92,490) 87,464 - 8,276
comprehensive
income for
the year
Loss for the 87,464
year
Other - (46,335) -
comprehensive (46,335)
income
Foreign (46,335)
currency
adjustments
Transactions 14,500 - 14,500 -
with owners,
recorded
directly in
equity
Employee 14,500
Share Option
Scheme:
Share-based
payments:
Employees and
Directors
shares and
options
Balance at - - 1,055 -
31 December
2009
(28,400) (138,825) 56,684 - 1,055
Company Ordinary Share Premium Share Based
Share Capital Compensation
Reserve
US$`000 US$`000 US$`000
Balance at 31 December 2007 5,017 191,406 18,153
Total comprehensive income
for the year
Profit for the year - - -
Other comprehensive income
Foreign currency - - -
adjustments
Transactions with owners,
recorded directly in equity
Shares issued during the 6 - -
year
Employee Share Option
Scheme:
Share-based payments: - - 8,276
Employees and Directors
shares and options
Balance at 31 December 2008 5,023 191,406 26,429
Total comprehensive income
for the year
Profit for the year - - -
Other comprehensive income
Foreign currency - - -
adjustments
Transactions with owners,
recorded directly in equity
Employee Share Option
Scheme:
Share-based payments: - - 1,053
Employees and Directors
shares and options
Balance at 31 December 2009 5,023 191,406 27,482
Company Foreign Accumulated Total Equity
Currency Losses US$`000
Translation
Reserve
US$`000
US$`000
Balance at 31 December 2007 (8,014) (10,574) 195,988
Total comprehensive income
for the year
Profit for the year - 12,965 12,965
Other comprehensive income
Foreign currency (58,189) - (58,189)
adjustments
Transactions with owners,
recorded directly in equity
Shares issued during the - - 6
year
Employee Share Option
Scheme:
Share-based payments: - - 8,276
Employees and Directors
shares and options
Balance at 31 December 2008 (66,203) 2,391 159,046
Total comprehensive income
for the year
Profit for the year - 52,249 52,249
Other comprehensive income
Foreign currency 16,799 - 16,799
adjustments
Transactions with owners,
recorded directly in equity
Employee Share Option -
Scheme:
Share-based payments: - - 1,053
Employees and Directors
shares and options
Balance at 31 December 2009 (49,404) 54,640 229,147
2009 2008 2009 2008
US$`000 US$`000 US$`000 US$`000
CASH FLOWS FROM OPERATING
ACTIVITIES
(Loss)/Profit before tax 52,249 12,965
(45,789) (39,561)
Adjusted for :
Depreciation and amortisation 2,479 1,210 - -
Employment benefit expenditure 1,053 8,769 280 3,755
(Share-based payments)
Loss on disposal and scrapping 501 1 - -
of property, plant and
equipment
Impairment of inventory 1,947 - - -
Impairment of assets 4,476 - - -
Net gain on foreign exchange
(7,596) (165) (32,177) (6,040)
Increase in operating lease 9 18 - -
liability
Sundry income (2) - - -
Interest received (6,225)
(3,996) (23,029) (5,847)
Finance costs 1,108 27 - -
Changes in working capital
(Increase)/decrease in 60 (5,144) (12) 646
prepayments and other
receivables
Increase in inventory (842) (852) - -
Increase/(decrease) in trade 3,862 2,107 (134) (402)
and other payables
Increase in provisions 13 660 - -
Cash flows used in operations 5,077
(42,717) (39,155) (2,823)
Interest received 2,899 6,225 2,165 5,847
Finance costs (83) (27) - -
Sundry income 2 - - -
Net cash (used in)/from (658) 10,924
operating activities (39,899) (32,957)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property, plant & - -
equipment (26,915) (10,856)
Proceeds from disposal of 104 18 - -
property, plant and equipment
Purchases of intangible assets - - -
(1,185)
Increase in loans receivable - - - -
(103,205 (69,219)
)
Net cash used in investing
activities (27,996) (10,838) (103,205 (69,219)
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayment of borrowings (36) (30) - -
(Increase)/decrease in security (221) (5,347) (9) 60
deposits
Proceeds from issuance of - 2 - 6
shares
Net cash (used in)/from (257) (5,375) (9) 66
financing activities
Net (decrease)/increase in cash
and cash equivalents (68,152) (49,170) (103,872 (58,229)
)
Cash and cash equivalents at 69,601 149,195 66,089
beginning of year 147,881
Effects of exchange rate 14,450 46,630
movement on cash balances (30,424) (23,563)
Cash and cash equivalents at 15,899 69,601 8,847 66,089
end of year
BASIS OF PREPARATION AND GENERAL INFORMATION
1. General information
These are the non statutory financial statements, extracted from the Group
and Company annual financial statements for the year ended 31 December 2009.
Central Rand Gold Limited ("CRG") 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. CRG`s operating subsidiary is
Central Rand Gold South Africa ("CRGSA"). CRG has a primary listing on the
London Stock Exchange ("LSE") and a secondary listing on JSE Limited ("JSE").
Legally, CRG 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 and Company annual financial statements for the year ended 31
December 2009 were approved for issue on 28 April 2010. The auditor has
issued their unqualified auditors` opinions on the Group and Company
financial statements for the year ended 31 December 2009.
Accounting policies
The Group and Company annual 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") in accordance
with EU laws (IAS Regulation EC 1606/2002).
The accounting policies have been consistently applied to all years
presented.
Going concern
The Directors have prepared the financial statements on the going concern
basis having considered the current trading, the current funding position and
the projected funding requirements of the business for at least the next 12
months from the date of approval of the financial statements.
Current trading
The Group is developing a series of former mine workings to the south of
Johannesburg with a view to using new technology and mining methods to
extract gold in sufficient quantities to be commercially viable. In the year
to 31 December 2009, the Group incurred a loss of US$46.3 million as a result
of these development activities. Since the year end, the Group has continued
its programme of development, completed a successful trial mining project at
its decline on the Central Main Reef and has received a Competent Persons
Report from Snowden Mining Industry Consultants Pty Limited which has
concluded favourably on the viability of the Group`s plans.
Current funding
At 31 December 2009, the Group had cash of US$15.9 million.
On 22nd January 2010, the Group undertook a share placing which raised US$6
million, net of fees, to provide additional working capital during the period
of trial mining.
At 31st March 2010, the Group had cash of US$11.1 million.
Projected funding requirements
The Group has prepared initial projections for its planned development
activities and operations which show that the Group needs to raise up to
US$35 million to fund its investment in capital equipment and working capital
through to 31 December 2013, by when the projections show the Group to be
generating positive free cash flow and in full commercial production.
The Directors have engaged Evolution Securities to assist the Group in
raising new equity funding and it is anticipated that the fundraising will
take place by the end of July 2010.
The success of the fundraising is dependent on a number of factors, the most
important of which from a financial point of view is whether the Group is
able to reach a satisfactory outcome in its on-going negotiations with the
South African Government and other mining companies on the collective funding
of a new water pumping facility for the Central Rand Basin. The Group
requires the new facility to ensure that the water table is maintained at no
less a depth than 400 metres. The Directors are confident, based on their
discussions to date, that a satisfactory outcome is achievable but they
recognise the need for certainty in this matter in advance of a fundraising
exercise. Should this not be satisfactory outcome there may be a need to
increase funds to be raised.
On the assumption that new funding is raised, the risks inherent in any
mining operation will apply to the Group. In addition, the nature of what
the Group is seeking to do, i.e. moving from trial mining to full commercial
production in former mine workings, brings associated risks around the
execution of the development programme being delivered on time and on cost.
In the event that actual revenues are lower than projected or actual costs
exceed budget in the period to full commercial production, particularly in
2012 and 2013 and these factors result in the need for additional funding, it
is possible that the Group may have to seek additional sources of finance
either by way of debt or equity raising to complete its development programme
and reach full commercial production.
Conclusion
The requirement for a fundraising and the dependency of this on the Group`s
discussions relating to the water pumping facility referred to above
represent a material uncertainty that may cast significant doubt upon the
Group`s and the Company`s ability to continue as a going concern and 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, its cash flow projections and the risks and
uncertainties associated with these, and the Directors` expectation for a
successful fundraising, the Directors have a reasonable expectation that the
Group and Company have adequate resources to continue in operational
existence for the foreseeable future. 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.
Foreign currency rates
The US Dollar rates of exchange applicable to the period are as follows:
Period ended 31 Period ended 31 December
December 2009 2008
Closing Average Closing Average
South African 0.13482 0.12057 0.10601 0.12327
Rand
Pound Sterling 1.59257 1.56593 1.44792 1.85518
2. Property, plant and equipment
During the year, the Group spent US$26,914,650 on processing plant and
equipment and mine development.
3. Intangible Assets
CRGSA was deemed to have exercised the option to acquire the entire
shareholding in FEIC once the New Order mining right was granted by the DMR.
Furthermore CRGSA has, in accordance with the further requirements for
transfer of the shareholding spent not less than US$2,000,000 on
exploration. Ministerial consent in terms of section 11 of the Mineral and
Petroleum Resources Development Act has been obtained to the change in
shareholding in FEIC on 25 February 2009. CRGSA paid US$1,000,000 as
consideration for the purchase of FEIC effective 25 February 2009. As a
consequence of the change in shareholding, FEIC became a subsidiary of the
group and has been consolidated in the group financial statements. The
acquisition of the New Order Mining Right held by FEIC was capitalised as an
intangible asset on transaction date.
4. Loan receivable
Puno Gold Investments (Proprietary) Limited
Since the last report for the interim results for the six months ended June
30, 2008 there has been no resolution to the dispute relating to procedural
breaches of the Central Rand Gold South Africa (Proprietary) Limited (`CRG
SA`) shareholders agreement between CRGSA and our BEE partner, Puno Gold
Investments (Proprietary) Limited.
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. As
per the provisions of the shareholders agreement, the Chief Executive
Officers and subsequently the Chairmen of both Puno and CRGSA met in an
effort to amicably resolve the matter. These meetings have unfortunately
proven to be unsuccessful. 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.
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 an Option to call for Puno`s entire shareholding in
CRGSA pending the final determination by arbitration of the validity and
enforceability of: 1) the various funding calls made by CRGSA, under the
auspices of the CRGSA Shareholders` Agreement, for Puno to make its pro
rata contribution to funding requirements; and the consequent Call
Option and; 2) the interpretation of the shareholder funding provisions
of the Shareholders` Agreement. The parties agreed that the matter would
proceed to arbitration as sought in the application and currently the
pre-arbitration formalities are being finalised in regard to the
arbitration. It is expected that absent agreement on the terms of the
arbitration by no later than the end of April 2010, the matter will be
unilaterally referred to the Arbitration Foundation of South Africa.
In the event that Puno is successful in relation to its litigation,
CRGNV will be unable to exercise its call option over Puno`s shares in
CRGSA and will therefore not be able to introduce a new BBBEE compliant
partner who the Directors believe will be more beneficial for the Group
as a whole. Puno issued an urgent application out of 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 Shareholders Agreement entered into
between Puno, CRGSA, CRGNV and the Company. The effect of Puno`s success
would result in a retention of their 26% shareholding. Absent success,
the shares would be purchased by CRGSA for a nominal value.
In a judgment delivered by Acting Judge, Alan Horwitz SC, on Thursday, 5
November 2009, Puno`s application was dismissed with costs, including
the costs of two counsel. 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 particular, Acting Judge
Horwitz found that the applicant, Puno, had failed to make out a case
against CRGSA which could substantiate Puno`s interpretation of the
clause under scrutiny or its alleged prejudice suffered as a result
there-from.
Puno has sought leave from the South Gauteng High Court to appeal this
ruling, the matter was argued on 5 April 2010, and Puno`s application
was dismissed.
The Directors are confident of success at the arbitration proceedings
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 through from the company to CRG SA.
This additional 26% of intercompany debt excluding interest amounts to
ZAR 151,903,560 (US$ 18,315,012) between 1 January and 31 December 2009
(ZAR 114,139,770 (US$ 12,099,957) between 1 January and 31 December
2008).
The loan payable to Puno contains the same allocations referred to above.
5. Non-current assets held for sale
Land and buildings to the value of US$455,018 and plant and equipment
(consisting of the Gekko 20 ton per hour gold processing plant and mining
head gears purchased for the trial mining and shaft reaccess programme) to
the value of US$2,295,311 has been classified as held for sale at 31 December
2009. Management is committed to a plan to sell the assets and an active
programme to find a buyer and complete the plan has been initiated.
6. Directors` emoluments
In May 2009, Mr M Sullivan resigned as Chief Operating Officer of the
Company. The first and second tranche of share options were not forfeited and
the vesting remains the same as described. The final portion of the options
granted were forfeited. The total number of share options that were forfeited
are 821,999. Due to his resignation the future share options were recognised
on the date of his resignation. The value of the accelerated share-based
payments for these share options is GBP 97,661 (US$ 152,931). The value of
the share options that were forfeited as a result of his resignation is GBP
353,851 (US$ 554,106). The value of the forfeited share options that were
previously recognised was reversed in the period. The value of this reversal
is GBP 81,199 (US$ 127,152).
7. Commitments
Group 2009 2008
US$`000 US$`000
a) Purchase of shares in companies
Purchase of shares of Ferreira Estate and - 1,000
Investment Company Limited (`FEIC`)
b) Various contractual amounts payable
Fees payable to iProp Limited for prospecting 500 500
Option fees payable to Gravlotte Mines Limited - 100
Fees payable to Department of Minerals and energy
within one year 12 7
Plant and equipment contracted for - 6,295
c) Donations payable
Donations payable to Umkhonto we Sizwe Military
Veterans Association (MKMVA) 109 83
8. Segment Reporting
The entity`s chief operating decision maker reviews information on 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.
9. Share-based payments
Grant of options in the Company
During the year the Company granted the following share options to Directors
and Senior Managers of the Group. The options are summarised below.
Vesting Strike Price Allocation Number of
shares
600,000 on 31 Exercise price Mr S.J. du
October 2009, escalates in Toit 1,800,000
600,000 on 31 accordance with
October 2010 and the vesting
600,000 on 31 tranches. One
October 2011. third at price
of GBP0.50, one
third at GBP1.00
and one third at
GBP1.50.
1,033,333 on 3 Exercise price Executive
September 2010, escalates in Management 3,100,000
1,033,033 on 3 accordance with
September 2011 and the vesting
the balance on 3 tranches. One
September 2012. third at price
of GBP0.30, one
third at GBP0.60
and one third at
GBP0.90.
300,000 on 1 June Exercise price Mr D. Harper 900,000
2010, 300,000 on 1 escalates in
June 2011 and accordance with
300,000 on 1 June the vesting
2012. tranches. One
third at price
of GBP0.30, one
third at GBP0.60
and one third at
GBP0.90.
Issued on behalf of: Central Rand Gold Limited
Date: 29 April 2010
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.
Contact:
Johan du Toit +27 (0) 11 551 4000
Patrick Malaza +27 (0) 11 551 4000
Enquiries:
Evolution Securities Limited +44 (0) 20 7071 4300
Simon Edwards / Chris Sim / Neil Elliot
Macquarie First South Advisers (Pty) Ltd +27 (0) 11 583 2000
Thembeka Mgoduso / Annerie Britz /
Melanie de Nysschen
Buchanan Communications Limited +44 (0) 20 7466 5000
Bobby Morse / Katharine Sutton / James Strong
Jenni Newman Public Relations (Pty) Ltd +27 (0) 11 772 1033
Jenni Newman / Megann Outram
Date: 29/04/2010 09:23:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
