13 Oct 2017 15:00
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 2007/019223/10)
ISIN: GG00B92NXM24
LSE share code: CRND
JSE share code: CRD
("Central Rand Gold" or the "Company")
Trading and Market Update, Posting of Circular and Notice of General Meeting
A Circular setting out the background to and reason for the intended disapplication of pre-emption rights as well as the Proxy form to be used by both South African and United Kingdom shareholders will be posted to shareholders today.
Attention is drawn to the content of that Circular, and the Trading Update contained therein, which is reproduced below.
Shareholders will find set out at the end of the Circular a notice convening the General Meeting to consider the proposals in relation to the disapplication of pre-emption rights and are hereby advised that the General Meeting of the Company is to be held on 30 October 2017 at the offices of IAG offices, Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3RH at 11.00 a.m. (UK time).
The Notice of the General Meeting as well as the Proxy form to be used by both South African and United Kingdom shareholders at the General Meeting can be accessed on the Company's website at www.centralrandgold.com. Defined terms in the update below will have the same meaning as those set out in that circular.
The Company hereby informs its shareholders that its audited report and accounts for the financial year ended 31 December 2016 will be announced on Monday 16 October 2017.
For further information, please contact:
Central Rand Gold +27 (0) 87 310 4400
Lola Trollip
ZAI Corporate Finance Ltd - Nominated Adviser +44 (0) 20 7060 2220
John Treacy
Peterhouse Corporate Finance Limited - Broker +44 (0) 20 7469 0930
Lucy Williams / Fungai Ndoro
Merchantec Capital +27 (0) 11 325 6363
Marcel Goncalves / Monique Martinez
Johannesburg
13 October 2017
JSE Sponsor
Merchantec Capital
The information contained within this announcement is considered to be inside information prior to its release as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.
Notice of General Meeting - Disapplication of Pre-emption Rights
The GM of the Company is to be held at IAG offices, Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3RH at 11:00 a.m. (UK time) on 30 October 2017.
The purpose of this letter is to explain the business to be considered at the GM and to confirm that your Board recommends that you vote in favour of the Resolution.
You will see from the Notice of GM set out in part 3 of this document that only one Resolution is to be considered, namely to allow the Directors to allot Ordinary Shares and to disapply pre-emption in respect of the Ordinary Shares up to a maximum aggregate nominal amount equal to £30,000,000 (being approximately 1000.56per cent. of the issued share capital of the Company as at 13 October 2017).
The Directors currently consider that appropriate additional external funding should be available following the approval of the Resolution but, in the event that the Resolution is not approved by Shareholders, then the Company will be unable to issue new Ordinary Shares to raise funds and if an alternative source of finance cannot be found in the very near term, which is unlikely to be forthcoming, it is likely that the Group will be unable to continue as a quoted entity.
The Directors currently consider that should any external funding be successfully effected, it is likely to be at a price which is materially dilutive to existing shareholders. It is therefore the Directors' intention that should a materially dilutive fundraise be effected, existing shareholders will be given the opportunity to participate alongside new investors in an Open Offer (with an excess application facility) at the same price as soon as practicable thereafter.
Current Trading and Market Update
Central Rand Gold is the holding company for a group of companies engaged in gold mining and exploration projects within the Central Rand Goldfield, bordering the southern outskirts of Johannesburg in South Africa. Central Rand Gold has mining rights from the South African Department of Minerals Resources over the Consolidated Main Reef, Langlaagte, Crown Mines and City Deep with prospecting rights granted over an additional five areas.
The Company has faced, and continues to face, a number of significant operational and financial challenges to enable it to remain a viable project. These include:
· adverse weather conditions which have materially adversely affected production operations and completely prevented any deep excavation activity from occurring;
· labour force issues;
· operational difficulties;
· obstacles to materials processing; and
· a continued lack of co-operation from the operating subsidiary's Black Empowerment Partner, Puno.
Puno Gold Investments Proprietary Limited
Relations at the operating subsidiary, Central Rand Gold SA, with a Black Empowerment Partner, Puno Gold Investments Proprietary Limited, have been poor. Puno recently lost a High Court case brought against it by the Company, Central Rand Gold SA and Central Rand Gold SA's immediate parent company in respect of a cash call under the shareholders agreement relating to Central Rand Gold SA, which has resulted in an order for Puno to pay to Central Rand Gold SA the sum of R72,326,573.47 plus the legal costs incurred by the applicants. The Board of Central Rand Gold SA finds Puno a difficult and obstructive partner, which seems to be a loose term in that context. That board regards Puno as destroyers rather than creators of value, seemingly seeking to obstruct progress at each and every turn. The management time and legal costs involved in having to deal with Puno are, whilst necessary to protect the interests of shareholders, a significant drain on, ultimately, the Company's resources. Legal actions and allegations brought by Puno, whilst without merit, nevertheless have to be responded to, which takes time and money.
Feed material
The feed material provided by the tolling company was inappropriate in that the materials supplied differed hugely in quality from those sampled and as a result, materials from the Mine Waste Dumps acquisition was used. This, however, was too expensive to economically extract in this fashion as the grade of the material is too low, and the requirement for additional chemicals in order to extract the gold from the material is not economical. Even the proposed introduction of the concentrator circuit would not compensate economically for the poor viability of the feed from the Mine Waste Dumps acquisition. Since year end the majority of feed has been the Company's own material.
Open pit mining
The Company has commenced small scale open pit mining, in slot 4 of the Kimberley reef. Materials from those operations are being processed and the Company is also processing third party materials on a tolling basis.
Concentrator circuit
The Company has also progressed its strategy of procuring centrifugal concentrators. These will be used to semi-process 40,000 tonnes of sand and slimes reclaim material, and then to metallurgically treat only a small percentage of the result, which will accordingly be richer in gold. It is likely that the arrival and go-live of the concentrator circuit shall occur later than the Company had originally announced. This delay has also led to a strain on the Company's financial position.
Labour dispute
11 days of post year end production were lost due to industrial action under which the unionised workforce declared a dispute regarding the implementation of wage increases. The parties settled at the CCMA with the result that 50% of each employee's monthly salary shall be paid in the form of a "13th cheque" in December 2017. This dispute involved unpleasant picketing of the site and "no work, no pay"; the additional payment agreed and the effect of the strike did not result in additional cost to the Company at that point although the management distraction, the downtime and the future additional cost has further put the Company's resources under strain.
Mill downtime
The excessive rainfall in the region adversely affected the running of the mills (mill 1, 2 and 3) and they struggled to cope with crushing significantly cloggier and muddier feed materials than had been contemplated. This resulted in a reduction in processing output.
Further, the instability of the power grid in the region, and the adverse weather which resulted in electrical storms, together resulted in a number of power outages on site which materially affected production in Q1 of this year.
Perversely, the excessive rainfall had been preceded by a drought which resulted in water use restrictions being imposed throughout Gauteng. The Company invested in a reticulation system to enable production to continue - this required yet additional expenditure for which the Company had not budgeted.
In light of the above, the Directors believe, with regret, that the Company's retention of its interests in the mining projects is simply not viable. Accordingly, the directors are actively pursuing options which would involve retaining its listings but will require the disposal of the Company's interests in its immediate subsidiary company, Central Rand Gold (Netherlands Antilles) NV, unless it is able to secure sufficient alternative finance at the required level in the very near future. Any such disposal will be subject to approval of shareholders at a future General Meeting.
To that end, the Directors are applying for authority to disapply the pre-emption rights contained within the Articles for an unusually large amount to give the Directors flexibility to raise funds such as may be necessary in the near future to attempt to save the Company's AIM listing, if not its operations. I emphasise that the Directors intend that Shareholders be given the opportunity to participate in an open offer at the same price as an external equity investment is made in the near term. The only reason an open offer is not being undertaken now is the cost and the time it would take to implement.
Suspension of trading
The Company could not guarantee that it could continue to be able to meet its financial obligations as they fall due and as a result, the Company requested a suspension in trading in its shares on 11 May 2017. The Company's shares remain suspended, pending further developments, but it is anticipated that application will be made for suspension to be lifted should sufficient further funds be raised.
Extraordinary Resolution - Disapplication of Pre-emption Rights
The Directors are seeking authority to allot Ordinary Shares for cash free of pre-emption rights, such authorities being limited to the allotment of 3,000,000,000 Ordinary Shares (being approximately 1000.56 per cent. of the issued share capital of the Company as at 12 October 2017).
Action to be taken in connection with the Notice of GM
Enclosed with this document is a Form of Proxy for use at the GM. All Shareholders (including South African Certificated Shareholders and South African Dematerialised Shareholders with Own Name Registration but excluding all other South African Dematerialised Shareholders) who do not intend attending the GM are asked to complete and return it to the Company's Registrars, Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU or, for convenience, to the Transfer Secretaries in South Africa being Terbium Financial Services Proprietary Limited, 31 Beacon Road, Florida North, 1709 (PO Box 61272, Marshalltown, 2107), or crg@terbium.global so as to be deposited with the Registrars or the Transfer Secretaries in South Africa as soon as possible, and in any event not later than 11:00 a.m. (UK time) (being 12 noon South African time) on 26 October 2017. Completion and return of the Form of Proxy will not affect a registered Shareholder's right to attend and vote at the GM should they wish to do so.
South African Dematerialised Shareholders who do not have Own Name Registration and who wish to attend the GM should instruct their CSDP or broker to issue them with the necessary Letters of Representation to attend the meeting in person or by proxy and vote, in the manner stipulated in the custody agreement governing the relationship between such Shareholders and their CSDP or broker. These instructions must be provided to the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature.
South African Dematerialised Shareholders who do not have Own Name Registration and who cannot attend but who wish to vote at the GM should provide their CSDP or broker with their voting instructions, in the manner stipulated in the custody agreement governing the relationship between such Shareholders and their CSDP or broker. These instructions must be provided to the CSDP or broker by the cut-off time and date advised by the CSDP or broker for instructions of this nature.
Recommendation
The Board considers that the above proposals are in the best interests of the Company and its Shareholders as a whole.
The Directors currently consider that appropriate additional external funding will be available following the approval of the Resolution but, if the Resolution is not approved by Shareholders, then the Company will be unable to issue new Ordinary Shares to raise funds and if an alternative source of finance cannot be found in the very near term, as is unlikely to be the case, it is likely that the Group will be unable to continue as a quoted entity. It is likely that insolvency proceedings would then begin shortly thereafter.
Accordingly, the Board unanimously recommends Shareholders to vote in favour of the Resolution at the GM.