LONDON (Alliance News) - Central Rand Gold Ltd shares rose on Tuesday after the company released a flurry of news concerning financing, production, acquisitions and the management of its South African subsidiary.
Central Rand shares were trading up 25% to 3.11 pence per share on Tuesday morning.
Starting with the funding update, the miner said it has been talking to its strategic partner, Zhejiang Golden Machinery Plant (ZGMP), over the last three months about the potential for ZGMP to make an investment into the company.
Although Central Rand expects the talks to come to fruition "in the near-term", the pair still need to agree on the size, structure and timing of the investment, it said.
As a result, Central Rand has had to take out some bridge funding to keep going until the deal with ZGMP can be finalised. The company, through a combination of convertible securities and warrant issuance with Bergen Global Opportunity Fund LP, has secured up to USD4.1 million.
The initial tranche of funds will total USD598,000 and will be issued "shortly" with any other drawdowns to be announced as and when they occur. The remaining USD3.5 million will be available by "mutual consent," suggesting it may not be guaranteed.
Bergen can convert the outstanding amounts into shares in the company over a 24-month term and the exercise price will either be 90% of the average share price over five days following conversion or at GBP0.0372 - whichever Bergen prefers.
Notably, Central Rand also has issued 3.8 million shares to Bergen as a "commencement fee" and another 2.8 million shares at par. Another 4.8 million warrants have also been issued to Bergen with an exercise price of GBP0.0372.
In a separate move, Central Rand has also raised a further USD200,000 by conducting a subscription of 4.6 million new shares at an issue price of 3.0 pence each, which have been snapped up by "two high net worth individuals including an existing shareholder" that are "not related to Bergen".
Following the 6.6 million shares to be issued to Bergen and the 4.6 million shares to be issued as part of the subscription, Central Rand will have a total of 141.4 million shares in issue - meaning those shares will represent around 7.9% of the company's enlarged issued share capital.
Looking at the company's operations, which are solely focused around the Central Rand gold field in South Africa, the miner said it has decided to cease open-pit mining operations "for the immediate period" so it can focus on rehabilitating the underground mine.
Central Rand's mine was hit by floods that forced the company to focus on mining the surface and open pits at the operation. The miner has spent 18 months trying to find other accessible resources since the flooding occurred, but has now decided to take further action following volatility in the grade being produced.
Between the start of 2016 and the suspension of the open pit operations in late May, the company said it mined 68,077 tonnes of ore graded at 1.93 grammes of gold per tonne of ore, but that grade had started to slip.
"Due to recently experienced grade variability from the surface operations, the company has decided to cease open pit mining operations for the immediate period and will focus on rehabilitation of opened up areas, as well as processing material under the tolling venture," said Central Rand.
The tolling venture was unveiled on Tuesday as the company demonstrated its efforts to maintain operations despite ceasing mining operations. Central Rand has signed a deal with a third party which will now supply a minimum of 18,000 tonnes of ore per month to Central Rand to make up for the lack of ore coming from the miner's own operations.
To put that into perspective, the plant at the operation has the current capacity to process 20,000 tonnes of ore per month. The ore is of a similar nature and grade to the material that has been historically processed in the plant, the company said.
On top of that agreement, Central Rand said it hopes to look for further joint venture opportunities within the region surrounding its metallurgical plant, and said ZGMP is working to assist the company in this regard.
The pair were holding talks last year about exploiting the plant, and the company's currently in-accessible underground resources.
"Representatives from ZGMP will be onsite at Central Rand Gold in early June 2016 to progress these opportunities to an investment decision stage. As soon as the company, in consultation with ZGMP, has finalised the preferred strategy it will update shareholders with necessary details," said the company.
Although underground operations have been suspended for a lengthy period of time, Central Rand is taking action through the acid mine drainage and central basin water table, which should help to de-water the central basin and allow underground operations to restart.
However, underground operations do not look set to restart any time soon.
"Implementation of the long-term acid mine drainage solution has to be preceded by a full environmental-impact assessment, which is expected to be concluded in 2017. The South African government has indicated that the long-term solution, which will incorporate the desalination technology, will be commissioned in late 2019," said the company.
Central Rand is also talking to private companies that may be able to help with the de-watering programme.
Away from that operation, Central Rand said it is also looking at acquisition opportunities that could deliver near-term production in Africa.
"The board is particularly interested in near-term production assets across a number of commodities including but not limited to precious metals and precious stones," the company said.
"The board is presently working with two parties regarding potential acquisition opportunities within Sub-Sahara Africa. Whilst discussions are at a preliminary stage, both opportunities exhibit characteristics which the board considers appealing, namely near term cash flow potential and low capital start-up costs," the company added.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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