[miningmx.com] — CENTRAL Rand Gold (CRG) is seeking to restore its
credibility in the market as it prepares shareholders for a possible future fundraising,
saying it is working on the details of a credible long-term strategy.
The company on Monday reported financial results for the year to end-December, a
period during which it not only had its mining right temporarily revoked, but also
declared its long-haul stoping mining method a failure and saw its resource base
being threatened by rising acid mine water.
The stock got punished as a result, with the JSE-listed shares falling from a high of
48c in January to 4c in September. Following the reinstatement of the mining right in
December, the share price has clawed its way back to Friday’s closing price of 14c.
In notes accompanying the results figures, CRG said it was back in cash-flow positive
territory following four months of “typical South African hand-held drilling’.
Its earlier flirtation with a long-haul stoping method proved to be disastrous because
of a so-called “hanging wall failure’ – resulting in excessive dilution – and was
abandoned in September 2011.
The change in mining method had assisted CRG to lift gold sales for the year to
14,856 ounces, from 2010’s 9,321 ounces.
CRG Chairman Michael McMahon warned that the cash flows stemming from the
underground operations were not enough to fund expansion, and would at most be
adequate for replacement development.
He said proper investment in expansion could increase the profitability of the
operation three-fold, but that this would require raising additional funds – adding he
was under no illusion the events of the past few years have left the company’s
reputation in tatters and that fundraising could be difficult.
“When the company is able to demonstrate 12 months of cash positive operations,
which it should by the end of 2012, we may be in a position to talk credibly about the
valuation gap between how the company sees itself and how it is assessed in the
market,’ he said, setting down 2014 as a target date for the development of some of
the group’s other properties.
“Approaching our long-suffering shareholders for further capital or accessing the debt
markets are difficult alternatives, but they will be considered in depth in the coming
months.’
CEO Johan du Toit told Miningmx the group would ramp up production to
12,000 tonnes per month by the end of the year, using the new mining methodology.
“We have enough developed ore to last us until next year,’ he said. “Decline
development only needs to start in 2013.’
A second priority is the calculation and reporting of a new reserve base, taking into
account the hand-held drilling method, as well as the completion of a scoping study
for Crown Mines. This would form the basis of the company’s new long-term strategy,
Du Toit said.
The issue of CRG’s revised social and labour plan – the reason why the company had
its mining right revoked last year – is another priority, and would have to be approved
by the Department of Mineral Resources by June 2012.
ACID MINE DRAINAGE
Du Toit also said acid mine drainage wouldn’t be a threat to the company as long as
the Trans-Caledon Tunnel Authority implemented its solutions to deal with the issue
in the Witwatersrand’s central basin.
The immediate priority of TCTA – which would utilise CRG’s pumps in the central basin
– was to keep the water below the environmentally critical level; the same level
where CRG currently operates.
