| Tue 12 Oct 2010, 8:00 | | CRD - Central Rand Gold - Operations Update |
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CRD
CRD
CRD - Central Rand Gold - Operations Update
Central Rand Gold Limited
("Central Rand Gold" or "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
OPERATIONS UPDATE
Central Rand Gold, the gold mining company with assets in Southern Johannesburg,
is pleased to announce the following update:
- Combined Exploration Target material of between 54,000 and 102,000 tonnes
at an average grade of between 5.1 and 5.2 grams per tonne have been
identified for extraction and processing until underground production
commences.
- Delivery of the Long-Hole Drill Rig required for stoping (delayed by the
capital raising) is expected by year end.
- Commercial production from underground stoping can thus only commence early
in 2011.
- 5,932 ounces have been produced in the current year to date.
- 2010 annual production target reviewed to 9,000 ounces - 11,000 ounces, as
a result of the delayed start to underground production.
- Underground development proceeds apace (345 metres completed in September
2010).
- Footwall decline development plans have been modified to allow more direct
access to reef (reducing decline development by 382 metres in 2011 and
saving US$0.6 million in capital expenditure).
- An alternative reef-access methodology has been developed for areas where
poor hanging wall conditions are encountered.
- Arbitrator appointed to commence arbitration proceedings with Puno Gold
Investments (Pty) Limited ("Puno").
- Independent Economic Scoping studies commissioned to evaluate the
Consolidated Main Reef ("CMR") East, Village and City Deep areas.
- The targeted 45,000 ounces of gold in 2013 (per the 2010 capital raising
Prospectus) remains on track.
1.Geology
1.1 Underground Geology
Geological mapping and close spaced channel sampling along 212 metres of the
currently developed on-reef drives have yielded positive results in terms of
the predictability of the Main Reef grades in our immediate mining area.
On Reef Resource Theoretical Resource
Development Block Insitu CO g/t Pay % Ave Width Ave g/t
g/t
1596 CMR 46 3.04 3.00 46% 151 4.67
1583 CMR 46 3.04 3.00 46% 151 4.67
1581 CMR 33 3.55 3.00 50% 112 5.29
1580 CMR 33 3.55 3.00 50% 112 5.29
1575 CMR 33 3.55 3.00 50% 112 5.29
1563 CMR 33 3.55 3.00 50% 112 5.29
1551 CMR 33 3.55 3.00 50% 112 5.29
1534 CMR 32 3.45 3.00 47% 110 5.32
Average 3.42 3.00 49% 120 5.13
Contained 410 616
Au
Equivalent 3.42 5.13
g/t
On Reef Resource Reef Drive Sampling
Development Block Insitu CO g/t Pay % Ave Width Ave g/t
g/t
1596 CMR 46 3.81 3.00 35% 100 9.18
1583 CMR 46 2.96 3.00 50% 100 3.85
1581 CMR 33 8.80 3.00 80% 100 10.58
1580 CMR 33 0.83 3.00 0% 100 0.83
1575 CMR 33 3.14 3.00 35% 103 6.07
1563 CMR 33 4.37 3.00 72% 111 5.36
1551 CMR 33 4.04 3.00 56% 104 5.83
1534 CMR 32 5.80 3.00 100% 123 5.80
Average 3.88 3.00 45% 103 6.12
Contained 401 6.33
Au
Equivalent 3.34 5.27
g/t
The table above portrays the deduced grades in the reef drives excavated thus
far (Theoretical Resource) and compares them to actual grades measured through
drive sampling. Whilst there is some degree of variation between the expected
grades and the actual sampled grades, this variation is generally on the upside
and overall a small positive increase in grade from 5.13g/t to 5.27g/t is
observed.
This strong correlation between underground Reef Drive sampling and the
Theoretical Resource Model continues to support the grade control and mining
assumptions made in the prospectus published on 04 June 2010 ("Prospectus").
As an additional aid to underground grade control, a mobile underground drill
rig has been sourced and is currently being used to test the application of
underground diamond drilling as a primary grade control technique. Initial
results are expected towards the end of the year and if positive, should result
in significantly improved grade control in areas where drive sampling is
restricted, thus allowing for a higher degree of selective mining.
1.2 Exploration and Expansion Activity
There has been considerable focus during the third quarter of 2010 on the
development and optimisation of the significant Australasian Joint Ore Reserve
Committee ("JORC") / South African Mineral Resource Committee ("SAMREC")
resource base available to the Company.
- Independent Scoping studies into the feasibility of developing CMR East are
currently underway and results are expected by the end of this calendar
year.
- CRG has also commissioned initial planning and scheduling studies to
investigate the economics of the City Deep and Village mining projects.
- Tender processes have commenced for Resource Drilling at the new Crown
Mines site. It is expected that this drilling programme will ultimately
lead to an upgraded Resource Statement and allow for the development of
Crown Mines as the next major stand alone operation, which will enable CRG
to further leverage its fixed cost base. Drilling is expected to begin late
2010/early 2011 and will run for most of 2011.
- Studies are also underway to investigate the economic potential of
subsidiary mineral assets such as the auriferous Kimberley and White Reef
packages. These largely unexploited and underexplored reefs are developed
over a continuous strike distance of more than 25 kilometres and remain a
very substantial part of the CRG portfolio.
2. Mining Operations
2.1 Key Mining Statistics
Year to date
30 September 2010 Actual Prospectus
Tons(t)/ Grade Tons(t)/ Grade
Metres(m) (g/t) Metres(m) (g/t)
Decline sinking (m) 727 669
Waste development (m) 1,042 420
Reef development (m) 355 2,008
Total (m) 2,124 3,097
Trial stoping (t) 6,073 2.6 23,752 3.80
Reef development (t) 39,669 1.7 77,202 1.80
Surface mining (t) 98,089 3.0 31,041 4.40
Total (t) 143,831 2.62 131,995 2.77
2.2 Underground Mining Operations
Pending receipt of the Long-Hole Drilling Rig (required for stoping) resources
have been applied solely to development (both footwall decline and on-reef pre-
stoping). Good progress and pre-stoping preparation mean that the targeted 45
000 (annualised) production rate by year end 2013 is still on track.
Monthly development continues at a good pace, with 345 metres (total on-reef and
footwall) being achieved for the month of September 2010.
Variable hanging wall conditions in on-reef drives are being encountered,
resulting in sub-economic volumes of associated waste development (refer to
section 3 - Mining methodology, for further clarification).
It is anticipated that the first three stoping levels in the current mining area
will predominately be mined through footwall development.
As mentioned in the June 2010 Interim Results announcement, the global increase
in the demand for mining equipment has resulted in delivery lead times
increasing substantially over the last six months. This was compounded by our
inability to contract for the additional equipment until the fundraising (which
took 6-8 weeks longer than anticipated) was completed.
Post the successful fundraising the Company was fortunate to secure its second
development Jumbo DD240, by end July 2010 (three months later than originally
planned). The other critical piece of equipment is the Long-Hole Rig (a
prerequisite for underground stoping).
The Company was initially only able to source a Long Hole Rig for delivery in
March 2011. Due to a cancellation of an existing order by another Mining
Operation CRG has been able to take over this order with delivery now expected
before the end of 2010. Consequently the Company now expects underground stoping
to commence in early 2011.
This delay in delivery does have short-term production implications as the 2010
production forecast in the Prospectus anticipated significant higher grade
underground ore before the end of the year.
This delay has been partially mitigated by extension of the surface exploration
and surface mining to supplement gold production.
2.3 Surface Material
To date 98,089 tonnes of surface ore has been mined at an average grade of
3.0g/t. This compares favourably to the original plan, which anticipated 2010
production of surface ore of 38,000 tonnes at 4.3g/t. Surface mining is
currently focusing on three open pit operations:
- Pit 1 (Central Pit) - extraction and processing has thus far provided the
process plant with approximately 17,000 tonnes of material with an average
stockpile grade of approximately 3.0g/t. Additional exploration target
material of between 10,000 and 30,000 tonnes with an average grade of
between 2.8g/t and 3.2g/t has been identified.
- Pit 2 (New Unified) - this open pit has to date yielded some 50,000 tonnes
at approximately 2.9g/t. Approximately 17,000 tonnes, at a similar grade,
still remains to be extracted.
- Pit 3 (New Unified extension) - currently being prepared for open pit
mining and good grades are expected from this area with between 27,000 and
55,000 tonnes of Exploration Target Material at an average grade of
approximately 7.3g/t available for extraction and processing during the
fourth quarter of 2010.
Note: The potential quantity and grade described by the term "Exploration
Target" is conceptual in nature and there has been insufficient exploration to
define a Mineral Resource and it is uncertain if further exploration will result
in the definition of a Resource. Further exploration work is ongoing, and
includes trial mining and processing of this shallow target to establish grade
and orebody continuity, mineability, dilution and throughput characteristics.
3. Mining methodology
As normal in our industry the Company continuously reviews, updates, optimises
and adapts its mine plan to match the realities of conditions experienced
underground.
3.1 Decline development
CRG has been able to redesign and reposition the underground decline for 2011.
The new design allows for central access to the ore body, which will reduce the
decline development required to access the resource. The new arrangement reduces
the planned 2011 decline development by 382 metres to 2,000 metres.
3.2 Alternative mining method
As noted in the June 2010 Interim Report, CRG has experienced variable ground
conditions within the reef drives. When poor hanging wall conditions are
experienced, it slows down development rates and increases support requirements.
To this end CRG commenced a study to identify alternative reef-access
methodology when poor ground conditions were experienced.
CRG`s alternative method uses footwall development along strike, with the Main
Reef being accessed via multiple cross cuts. All drilling and mucking operations
are undertaken from the footwall development and no personnel are exposed to the
Main Reef Leader ("MRL") void or hangingwall. The long-hole stoping patter is
slightly changed with fan-drilling being incorporated and the cement aggregate
fill pillars being place on strike as opposed to down-dip.
Snowden has reviewed the alternative method in the context of the unique mining
environment at CMR. In Snowden`s opinion the method has merit and should replace
the current method in areas of poor hanging wall conditions.
Access via footwall development at R107 per stoped tonne, costs approximately
16% more than on-reef development at R92 per stoped tonne. This is due to the
additional metres of development (essentially cross-cuts) required to access the
Main Reef. However, this cost is close to half the R203 per stoped ton actual
cost experienced of on-reef development in these poor ground conditions. CRG has
identified various opportunities to further reduce the cost of this approach so
that it can be more closely aligned to the originally planned on-reef
development cost of R92 per stoped ton.
Figure 1: Cross section showing sequential stages in the alternative mining
method*
(For the release with pictures and schematics, please refer to the Company`s
website: www.centralrandgold.com)
Figure 2: Long section showing the extraction sequence of the alternative mining
method*
(For the release with pictures and schematics, please refer to the Company`s
website: www.centralrandgold.com)
*A 4.5 metre wide footwall development drive, following the strike of the
deposit and located 10 metres horizontally from the Main Reef, will be
extracted. As this drive is being developed, 4.0 metres by 4.0 metres crosscuts
will be developed to intersect the Main Reef. These cross cuts are spaced 15
metres apart along strike. Once the top and bottom cross cuts have been
established, a top down long hole production open stope will be mined. Given the
flat dip of the Main Reef, the reef and parting will need to be "throw blasted"
to the cross cut, where it will be mucked using a remote control LHD. After the
stope is emptied, it will be backfilled using a combination of tipped waste and
waste mixed with cement slurry.
Footwall development has the following advantages in poor hanging-wall areas:
- Better ground conditions in the footwall of the Main Reef;
- Limited exposure of the Main Reef Leader hangingwall and therefore safer;
- Less support requirements than for Reef drives;
- Mining can commence as soon as the top and the bottom holings become
available;
- Mining can take place at several places at one time;
- Waste rock can be dumped in the old stopes; and
- More effective control of ventilation.
The following are the challenges facing footwall development:
- Additional waste development;
- Lower extraction where fall of ground occurs during the blast;
- Blockages at the draw points requiring secondary blast;
- Due to the size of the access points, the extraction method may not lend
itself to split firing of the middling and therefore the ore will be
diluted. Dilution from middling will however be limited by increasing blast
fragmentation size, scalping of large waste rock on surface and optical
sorting; and
- Sampling across the reef face will be limited to the access points. The
selective extraction of high grade blocks will be achieved by using Reef
Drive sampling where possible, and close spaced underground diamond
drilling in footwall development scenarios.
4. Metallurgy
The metallurgical plant has processed 133,748 tonnes of predominantly oxide ore
and recovered 5,932 ounces of fine Gold as at end September 2010. September was
a record month, with 1,120 ounces produced from relatively low grade (2.0g/t to
3.0g/t) material.
Higher grade oxide ore, as described in section 2.2 above, from new open pits
recently developed, is scheduled to be processed for the remainder of the year.
Gold production is lower than the forecast 8,844 ounces to end September 2010
due to the delay in the delivery of underground stoping equipment. This delay is
not expected to impact the Company`s medium term annualized production target
rate of 45,000 ounces pa by 2013. It should be noted that the Prospectus
production target of 5,724 ounces of Gold from lower grade oxide material in the
year 2010 has been increased as far as possible to partially offset the
shortfall of underground ore.
Production for the year will therefore predominately be from lower grade oxide
material at the current process recovery of 79%, which is marginally higher than
the recovery anticipated for this type of ore.
For the year ending 31 December 2010 CRG is expecting annual production, to be
between 9,000 ounces and 11,000 ounces.
Potential comminution bottlenecks identified during operation with the harder
underground sulphides have been investigated by Dowding Reynard & Associates,
(specialists in process plant design), in order to model an optimised crushing
and milling arrangement. Changes proposed include the incorporation of cone
crushers for secondary and tertiary crushing to effectively achieve the required
size reduction.
Elimination of intermediate stockpiles in these modifications will remove
associated material handling gold losses and reduce operating costs. US$1.7
million (not included in the Capital Raising forecast) has been approved to
carry out these upgrades and will be funded by savings in mobile earthmoving
equipment (no longer required in the new configuration) of US$570,000 as well as
the refund received from Gekko of the $2.3m deposit made for the second Gekko
processing plant, the order for which was cancelled in 2009. This refund was not
included in the 2010 capital raising Prospectus forecast.
5.Black economic empowerment
5.1 Arbitration
The Company has been advised by its subsidiary, Central Rand Gold South Africa
(Pty) Limited ("CRGSA"), that the Secretariat of the Arbitration Foundation of
South Africa has, in the absence of agreement between Central Rand Gold
Netherlands Antilles N.V. ("CRGNV") and Puno, appointed Judge Lewis Goldblatt to
arbitrate on the dispute to the entitlement of CRGNV`s call on Puno`s
shareholding in CRGSA and other ancillary issues.
Judge Goldblatt has been advised of the preliminary issues which have been
raised and the notice of a pre-arbitration hearing is expected imminently, at
which the procedures and final arbitration timetable required to address such
issues will be set out.
5.2 Legal cost recovery
CRGSA has advised the Company that on Tuesday 12 October 2010 the taxing
registrars at the South Gauteng High Court of South Africa will make a final
determination as to the quantum of costs to be recovered from Puno relating to
their failed application made earlier this year to obtain an interdict to stop
mining operations being carried out by CRGSA, which the High Court dismissed
with a costs order against Puno.
Ahead of this hearing attempts to settle the amount of costs due are being made
by both sides cost consultants, which may avoid the need for a protracted
hearing on 12 October.
6. Water table
As stated in the June 2010 interim announcement, pending final resolution in the
multi-party debate on acid mine drainage ("AMD") in the Central Witwatersrand
Basin, to limit the extent that the water table will rise above the 400 metres
below surface level the Company has ordered the proposed submersible pumps (the
longest lead items).
There continues to be positive communication with and commitment from, the South
African Government. South Africa`s Water and Environmental Affairs Minister,
Buyelwa Sonjica, indicated recently that she expects the AMD report being
compiled by a team of experts under government leadership, to be delivered on or
around 15 October 2010. She further stated that the Inter-Ministerial Committee
(IMC), appointed by Cabinet to address the AMD issue in the Western and Central
basins of the Witwatersrand has met four times since it was established in early
September.
CRG awaits the results of the report, which are expected to be announced by the
end of October 2010
7. Finance
Cash and cash equivalents increased during the third quarter from US$3.9 million
at 30 June 2010 to US$29.8 million as a result of the following items:
- Net proceeds from recent capital raising of US$36.5 million;
- Revenue from the sale of 2,648 ounces of gold processed from surface
mining;
- Refund of the deposit on cancellation of the order for the processing plant
of US$2.3 million, and
- Later than anticipated purchases of underground mining equipment.
Cash and cash equivalents were reduced by expenditure required to continue
development of the mine and surface mining operations, more specifically:
- Underground mine development expenditure of US$3.3 million;
- Procurement of mining fleet and other equipment of US$1.4 million;
- Mining of nearby surface materials as an additional source of gold while
the underground mining fleet is being procured; and
- In addition, the Company made payments of voluntary retrenchment packages
for 46 head office and support staff.
US$ (million)
Cash and cash equivalents at 1 July 2010 3.9
Gold Sales 3.2
Cash used in operations (8.0)
Interest Received 0.1
Mine property, plant and equipment (4.7)
Prepayments and deposit (2.2)
Net Proceeds from shares issue 36.5
Effect of exchange movement on cash balances 1.0
Cash and cash equivalents at 30 September 2010 29.8
The Company remains confident that it has sufficient cash resources to execute
the mining plan (with the minor alterations described above) outlined in the
Prospectus dated 4 June 2010.
Issued on behalf of: Central Rand Gold Limited
12 October 2010
Johannesburg
JSE Sponsor
Macquarie First South Advisers (Pty) Ltd
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) Ltd +27 (0) 11 583 2000
Annerie Britz /Melanie de Nysschen /
Yvette Labuschagne
Buchanan Communications +44 (0) 20 7466 5000
Bobby Morse / Katharine Sutton
Jenni Newman Public Relations (Pty) Ltd +27 (0) 11 506 7300
Jenni Newman / Megann Outram
The information in this statement relating to Mineral Resources and geology has
been reviewed and approved by Mr. Keith Matier, BSc (Hons), GDE, Pr Sci Nat, who
is a competent person in terms of the SAMREC and JORC codes. Mr. Matier is
Geology Manager of Central Rand Gold South Africa (Pty) Ltd and has over 17
year`s experience in exploration, mineral resource management and mineral
evaluation.
Date: 12/10/2010 08:00:04 Produced by the JSE SENS Department.
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