Central Rand Gold Regulatory News (CRND)

19 May 2009 11:54



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 2007/0192231/10)

ISIN: GG00B24HM601

Share code on LSE: CRND

Share code on JSE: CRD

Interim Management Statement

May 19, 2009 - London and Johannesburg listed Central Rand Gold ("CRG") is pleased to provide an operational update on the development of CRG's assets in southern Johannesburg. Highlights include:

Resource to Reserve 

Decline development 

Delivery and commissioning of metallurgical plants

Exploration 

Water table and CBEC 

Black Economic Empowerment 

Corporate Social Investment projects

The Company is now targeting to produce at annualised rate of 100,000oz of gold in early 2010 dependant upon the rate of underground development and the commissioning of the new 50tph Gekko plants

Johan du Toit, CRG's Chief Executive Officer stated: 

Johan du Toit, CRG's Chief Executive Officer stated, "CRG is continuing to make considerable progress in building a substantial low cost gold mine. We have commenced trial slot mining and should begin underground mining during August. In parallel, processing of bulk samples via our Gekko 20tph trial crushing and concentrating plant has demonstrated the capabilities of this plant. The months ahead will see CRG build up trial production from underground stopes accessed from the Slot 8 decline, whilst continuing to build surface infrastructure with a view to achieving commercial gold production late in the second half of this year".

For photos of the operations, please refer to the document published on Central Rand Gold's website: www.centralrandgold.com

  Conference Call & Webcast for the AGM - CRG will host a conference call on Thursday 21 May 2009 at 11:00 a.m. (London, GMT) and 12:00pm (Johannesburg) to provide an update for investors and analysts on its operational progress.

Participants may join the call by dialling one of the two following numbers, approximately 10 minutes before the start of the call.

From the UK: (toll free) 0800 496 0440

From outside the UK: +1 647 723 3976

Participant pass code: 2205709#

Other international dialling codes are available on:

http://www.readytalk.com/an.php?tfnum=8772948214

A live audio webcast of the call and a replay (available from 4:00pm London UK time) will be available on:

http://mediaserve.buchanan.uk.com/2009/cg210509/registration.asp

Contact: 

Operational Update

Operationally there are four areas of focus: 

conversion of Resources into Reserves;

surface infrastructure;

decline development; and

the implementation and operation of metallurgical processing plants.

Resource to Reserve Update

As announced on April 3, 2009, a Reserve statement is currently being compiled by Snowden Mining Consultants ("Snowden"). This process involved the audit of elements referred to as "modifying factors" (factors affecting extraction, including mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors). Snowden has undertaken rigorous internal reviews of the information presented to them. After having performed the reviews, it was established that further clarification and alterations of certain modifying factors were necessary before a Reserve statement can be released. Specifically, the modifying factors requiring additional information relate to mining methods and capital and operating cost estimates. Snowden has indicated that this statement should be released around mid 2009. This initial Reserve statement is focussing on the Main Reef of the Consolidated Main Reef ("CMR") tenement to a depth of 300m below surface. Once the Reserve conversion approach and methodology have been established, this process will be replicated and applied below 300m and to other tenements.

Surface Infrastructure

Slot 8 is located on the CMR tenement and was selected as the site for the first decline to access the Main Reef. Trial mining commenced in October 2008 through trench mining and processing of bulk samples.  Surface infrastructure development began in early 2009. A surface plot plan, in strict accordance with the Company's Environmental Management Plan, was developed optimising material flow from underground and through the processing plants. Further, the surface layout has been configured to accommodate all of the concentrator plants above ground until the appropriate timing to move these units underground. The appropriate timing will depend on production demands, underground development progress, ore grades and underground infrastructure.

The Company is pursuing a permanent power supply from City Power and is in design and enquiry stage at present with construction work expected to start in July 2009. Electrical power is currently supplied via diesel generators, most of which have been procured to act as backup power should the permanent City Power installation experience an outage. The Company has arranged for a 2MVA supply of power from Crown Gold Recoveries to replace some of the more expensive power produced by the generators. A permanent Rand Water connection has been installed. This will accommodate all potable water requirements at Slot 8. 

The balance of surface infrastructure activities related to offices, roads, workshops, explosive and emulsion bays are ongoing. Security is also a focal point in the design of surface infrastructure. 

(For photo, please refer to Central Rand Gold's website: www.centralrandgold.com) 

Slot 8 site

Decline Development

The work on the Slot 8 boxcut was commenced in November 2008 and, despite difficult ground conditions, was completed to the portal face in February 2009. 

(For photo, please refer to Central Rand Gold's website: www.centralrandgold.com) 

Slot 8 Portal

A group of contractors have been contracted to sink the decline and took over the portal face in March, commencing drilling and blasting. The Mining contractors include Grinaker-LTA Mining, an established mining contracting group. Initial decline development was limited to roughly one metre per blast due to poor ground conditions near surface. The use of Becker Arch sets has also been necessary owing to these poor conditions. The decline has now advanced approximately 75 metres (approximately 30 metres below surface) into largely competent hard rock quartzites. The requirement for Becker sets stopped at approximately 25 metres below surface and support thereafter has been provided by mechanical roofbolts. 

(For photo, please refer to Central Rand Gold's website: www.centralrandgold.com) 

Decline development on the Slot 8 decline

A new Double Boom Drill Rig is now operational on site with each boom capable of drilling a hole in excess of 3m in less than 2 minutes thereby enabling decline development at a rate of 4m to 6m per day depending upon ground conditions. 

(For photo, please refer to Central Rand Gold's website: www.centralrandgold.com) 

Double boom drill rig

Metallurgical Plant Update

The trial 20 tons per hour Gekko crushing and concentrating plant was commissioned in October 2008 and the flotation circuit was added and commissioned in January 2009. This unit is modularised on skids and specifically designed to be moved underground in the 6m x 5m decline tunnel. The plant was originally designed for the treatment of hardrock from underground. The surface oxidised material that is initially being fed through the plant was therefore not optimal and therefore initially, the plant was unable to reach the maximum throughput. Debottlenecking and upgrading of the system was systematically undertaken from commissioning (as described below) and the plant is now capable of troughput in excess of the nameplate 20 tons per hour. Optimisation in terms of availability to be able to reach the required 12,000 tonnes per month of capacity utilisation is ongoing. 

During January 2009 the total tonnage treated was approximately 3,800 tonnes. The major upgrade to the plant in January was the introduction of the flotation circuit which allowed for better recoveries to approximately 68%, although continuing to process sub-optimal surface oxidised material. With plant upgrading being conducted, 2,500 tonnes were processed in February with a recovery of approximately 68%.  March 2009 saw the end of the upgrading of the plant to accommodate the oxidised material and focus was placed on planned shutdowns and a reduction of backlog maintenance. Total tonnage treated - 5,267 tonnes with approximately 69% recovery. April Production reached a total of 10,013 tonnes with a 69% recovery, decreasing downtime and increasing production availability up to 90% with full optimal usage. Planned shutdowns took place accordingly reducing backlog and planned maintenance. Additional spares were accommodated which increased production.  

It is anticipated that the Gekko crushing and concentrating plant's stated throughput of 12,000 tonnes per month will be reached within the next two months.

The concentrate is largely being stockpiled to be treated by the Carbon-In-Leach ("CIL") concentrate treatment plant. The CIL plant, capable of treating 10,000 tons per month of concentrate, commenced civil work on site in February, 2009. This fast track erection has been undertaken by Time Mining with a predominantly pre-built plant containerised originally for export. Commissioning is planned to commence by the end of May 2009. This plant will provide relief for the stockpiled concentrate generated by the trial mining activities to date. Included in this plant is a smelt house facility which will enable CRG to produce Bullion bars (88%-90% Gold) which will be transported to Rand Refinery Limited for final refinement and sale. The anticipated first smelt on site is scheduled for June 2009.

(For photo, please refer to Central Rand Gold's website: www.centralrandgold.com) 

Carbon-In-Leach concentrate treatment plant

A Bateman 30 ton per hour concentrator ordered in 2008 was delivered in April 2009 and is being erected during May 2009. Civil work to accommodate this plant commenced in April 2009.

 (For photo, please refer to Central Rand Gold's website: www.centralrandgold.com) 

Bateman 30tph crushing and concentrating plant

Two further Gekko plants, each with 50 tons per hour capacities, ("Python 500's") were ordered in the period. This followed extensive interrogation and refinement of design work based on experience on the existing 20 tons per hour Gekko crushing and concentrating unit. The Python 500s are expected to be delivered to site in Q3 and Q4 2009. 

Exploration Update 

Exploration activities to date have focussed on the use of diamond drilling and reverse circulation drilling to obtain confidence in geological structure, identify ore that can be targeted and extracted from surface and obtain geotechnical information to be used in mine design.

225 diamond drill holes have been undertaken from the start of the exploration program to date, covering targeted pre-mining areas over the entire 40km strike length. These holes have resolved areas of structural complexity and have allowed for the creation of three dimensional models upon which to conduct mine planning and design. 

Of these 225 holes, 46 were drilled specifically to determine ground conditions ahead of the Slot 8 decline. The balance of the drilling focussed on identifying Resources on the Kimberley and Bird Reefs in addition to the current Main Reef and Main Reef Leader Resources already quantified. 

A total of 552 reverse circulation holes have been completed. These short percussion type holes were principally employed to evaluate areas where potential surface mining could occur and have allowed for the seamless transition from bulk sampling to slot mining at Slot 8 in December 2008. They have also provided the basis of the in-house evaluation of new additional surface deposits with the potential to provide plant feed during the metallurgical commissioning phase. The reverse circulation drilling programme was completed in the last quarter of 2008.

This philosophy of improving geological understanding across the entire strike length over all of the known reef horizons has continued through the first quarter of 2009, where diamond drilling has focussed in four separate areas, namely Slot 8 Main Reef on the CMR tenement, Slot 5 Bird Reef on the Crown Mine tenement, Slot 4 Kimberley Reef on the CMR tenement and Slot 11 Pyritic Quartzite on the City Deeps tenement. In total, nine diamond drill holes were undertaken during the first quarter of 2009. 

Slot 8 (Main Reef Package) 

Five diamond drill holes were undertaken in the immediate vicinity of the decline, primarily to test the rock stability and ground conditions ahead of the decline. They also confirmed the expected wide reef conditions in the immediate area and returned grades of between 2.42g/t and 3.70g/t over widths of between 143cm and 157cm respectively.

Slot 4 (Kimberley Reef Package)

Two diamond drill holes were positioned in the unmined area of the Kimberley Reefs between Slot 1 and Slot 4 to test the structural and lithological continuity between these two target areas. Whilst assay results are still outstanding, continuity between these two areas has been adequately demonstrated and will be incorporated into the existing digital model.

Slot 5 (Bird Reefs) 

During this quarter a single diamond drill hole completed the long running drilling programme in this area. Initial results from this slot confirm that gold grades in the Bird Reef zone are concentrated in the conglomerate of the White Reef itself. Grades are variable and tend to the low side (0.5 to 1.5 g/t range over 3m) across the 1,500m strike length immediately available for surface exploitation, however an approximate 200m long portion of the strike in the central part of the slot shows a continuous stretch of relatively high grades (4 to 5g/t range over a 3m width). This will be further investigated using surface sampling techniques.

Slot 11 (Pyritic Quartzite)

The Pyritic Quartzites are part of a well documented Erosion Channel that cuts through the Main Reef succession starting generally below the Main Reef Leader.

A single, deep hole was drilled in the City Deep lease area (Slot 11) to test the down dip extent of the City Deep Erosion Channel. The mother hole, with its 5 deflections, was designed to provide stratigraphic information on all reefs within the lease area as well as provide initial information of the auriferous Pyritic Quartzite channel. 

Both South Reef and Main Reef Leader return predictably high values over relatively wide corrected widths of 2.63g/t over 127cm and 5.19g/t over 173cm, respectively. 

The Pyritic Quartzite was intersected immediately beneath the Main Reef Leader as expected. Assay information from the deflections is outstanding but the mother hole returned a continuous zone of pyritic quartzite grading 1.65g/t over 7.4m. This hole will be fully assessed once the remaining deflections have been logged and assayed.

Underground Drilling (Main Reef Zone)

Underground exploration drilling has continued at the recently reopened East Shaft with the drilling of 22 underground holes targeting the Main Reef, Main Reef Leader and South Reefs as well as investigating the gold content of the middlings between these known reefs. Results have confirmed the existence of low grade zones of mineralisation outside of the Main Reef, South Reef and Main Reef Leader horizons. Drilling has also confirmed the position of pillars and other unmined areas in the East Shaft area.

Strategy for next quarter

The focus of drilling for the next quarter will change somewhat, with the increasing demands of the decline taking precedence. A single diamond drill rig will be employed to drill holes of a geotechnical nature planned ahead of the face, as the decline progresses. This rig will also be used to provide additional confidence in Inferred Resource blocks with the aim of converting the remaining shallow Inferred Resource to Indicated status. To this end, between nine and twelve diamond drill holes are envisaged for the coming quarter.

Underground drilling will be restricted to decline cover drilling with the imminent ramp up to underground production. 

Black Economic Empowerment Update

On February 16, 2009, Central Rand Gold Netherlands Antilles ("CRGNV"), Central Rand Gold's wholly owned subsidiary company which directly holds 74% of the shares in Central Rand Gold SA (Pty) Ltd ("CRGSA"), exercised the call option granted to it in terms of the CRGSA Shareholders Agreement and gave the requisite 90 days' notice to Puno Gold Investments (Pty) Ltd ("Puno"), CRG's Black Economic Empowerment partner to acquire its entire interest in CRGSA. This was owing to Puno's inability to provide funding as required in CRGSA's Shareholder Agreement. 

On April 7, 2009, Puno instituted an urgent application with the South Gauteng High Court, Johannesburg, to interdict CRGSA and CRGNV from proceeding with the exercise of the call option pending the final determination by arbitration or a court order of the validity and enforceability of:

the funding call by CRGSA;

the call option furnished by Puno in favour of CRGNV in respect of Puno's shares in CRGSA.

On May 13, 2009, CRGNV and Puno consensually agreed to refer the disputation over the call to an arbitration process. CRGNV is the claimant in these proceedings. CRG and Puno have agreed a timetable for the arbitration and the final outcome will be made an order of the court and will be binding. By agreeing to go through the arbitration process, there will be no further opportunity to approach the South African courts on the substantive issues between the parties and a final resolution will be obtained more quickly than via the ordinary court process.

CRG is still fully compliant with the current legislation relating to Black Economic Empowerment and has continuously kept South Africa's Department of Minerals and Energy abreast with all developments in this regard. CRG is firmly committed to the principles of Broad Based Black Economic Empowerment.

Water table and the Central Basin Environmental Corporation ("CBEC")

As published in the Company's 2008 annual report, CRG will be contributing to the building of a pump station to maintain the underground water levels in the Central Basin as part of the CBEC initiative. CBEC is comprised of CRG, DRDGold Limited and West Wits Mining Limited.

Murray and Roberts was commissioned to provide cost estimates and time horizons of this installation. Based on these studies, a final elevation underground and shaft location has been determined as 600 metres below surface in DRDGold's South West Vertical One Shaft. While final timing, costing and respective contribution for the water pumping station is expected in mid June 2009, the costing is expected to total in the region of US$ 22.5 million.

Finance Update

As at April 30, 2009, the Company had approximately US$51 million in cash on hand. Cash spend during 2009 has been primarily focussed on trial mining, the development of the decline and on payments required for completion and delivery of the metallurgical plants. The Company is currently undergoing a cost management and reduction exercise as part of its continual drive to ensure that cash resources are being spent effectively in maximising the Company's commercial activities at Slot 8.

Further development and financing

The Company is continuously making progress regarding the mine design and stoping methods. Capex to date has been funded by shareholders' funds. CRG is evaluating financing options relating to further expansion of the project including the utilisation of corporate debt or asset financing.

Corporate Social Investment

As part of CRG's Corporate Social Investment plans, CRG identified several projects which could enrich the lives of the community members surrounding CRG's tenements.

Bursary Program

The Company entered into a partnership with South Africa's Department of Education ("DOE") who provided the Company with a list of the top students from the poorest backgrounds who live in close proximity to the Company's mining tenements. CRG issued 13 full bursaries to these students including one bursary to a child of a CRG employee. The bursaries include tuition, books, accommodation close to Wits University and a stipend.

Weekend and Vacation School Project 

As with the bursary project above, CRG partnered with the DOE and embarked on a Weekend and Vacation School Project. This project aims to target the weakest performing Grade 12 learners in the poorest performing schools to try and achieve a 20% increase in pass rates in 2009.