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Central Rand Gold plans R1bn float
Allan Seccombe
Posted: Wed, 26 Sep 2007

[miningmx.com] -- CENTRAL RAND GOLD (CRG) is bringing defunct gold mines in southern Johannesburg back into production, and it is raising £75m (R1bn) towards becoming a million oz/year gold company by 2012.

CRG will list on the London and Johannesburg main bourses, possibly on 8 November. It will need to raise further capital as it builds up production to one million oz/year from 2012, CEO Greg James told Miningmx in an interview.

It is placing shares with UK, South Africa and European institutional investors on Thursday to raise the £75m to complete the bankable study by pushing a portion of its 33 million resource ounces into mineable reserves as well as preparing for first gold output in 2009. Evolution Securities, Macquarie First South and RBC Capital Markets are acting for CRG in the placing.
These people are putting their reputations at risk
In the first year of production in 2009, CRG plans to produce 150,000 oz of gold.

“The use of proven modern mass mining techniques, such as underground processing, will hopefully reduce operating costs and minimise the environmental impact of any new workings, while enabling the rehabilitation of man old workings,” James said.

One third of its 21.4 million oz of JORC-compliant indicated resources and 12.4 million oz of inferred resources lie above 900 metres and the remaining two thirds is between 900 metres and 2,500 metres. CRG will mine down to 1,800 metres. The average grade is estimated at 7.4 grams/tonne.

CRG has prospecting rights over 8 contiguous tenements. Two large tenements called Western Areas and Simmer& Jack have yet to be explored. There is no ownership of the land by the companies of the same names.

The key benefit is that CRG doesn’t have to incur the billions of rands to sink shafts. There are shafts and thousands of kilometres of tunnels abandoned in the early 1970s because of low gold prices and dwindling financial viability that will give the CRG access to untapped ore bodies.

“We are not mining old areas, but we will use the old workings to get to un-mined areas,” James said. Mining will focus on the Kimberley and Bird reefs. Earlier mining targeted the high-grade Main Reef package.

CRG estimates its total cash cost will be $320/oz. It estimates it will create 4,000 jobs in the mining project and a further 32,000 indirect jobs through services and procurement.

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CRG hopes to secure mining rights for which it applied in August this year around July 2008. It will then begin shallow mining from declines to some 30 metres below surface in first quarter 2009.

It will initially toll treat its production. An obvious company to approach for such services would be DRDGOLD, which has its Crown dump treatment project nearby. James said it was too early to say who would treat CRG’s material.

“It would make a lot of sense for them to toll treat at Crown. There’s capacity. They’d just have to put in a crusher,” said a source familiar with mining operations south of Johannesburg.

CRG, formerly Rand Quest Syndicate, has attracted a high calibre of management, including James, a chartered accountant, who was chief financial officer of Glencore’s coal operations. He later headed Glencore’s Industrial Assets division. He also worked at PriceWaterhouseCoopers for a decade.

He was brought into GRG as a non-executive in July 2006, rising rapidly to chief financial officer and then CEO. “It’s the quickest promotion I’ve ever had,” James said.

BHP Billiton’s former head of its base metals business Mike Salamon is a non-executive director at CRG. He is joined by Bob Kirby, a former executive president of BHP Billiton.

“In terms of getting a strong team to take CRG forward, we have managed to do that. They’ve taken a really good look at what we have. These people are putting their reputations at risk,” James said.

A bankable feasibility study will be completed by August next year, in line with the awarding of the mining licence.

CRG has applied for prospecting rights immediately south of its mining projects, which have not previously been mined. That land package is some 310 square kilometres.

The main concern would be community opposition to the project, which borders some densely populated parts of Johannesburg. James stressed CRG has worked very closely with communities from 2005 to win their support.

It will also try to minimise noise, dust and tailings impact for communities. It will use waste and tailings as backfill for its opencast and underground operations, avoiding the dusty dumps that blighted much of Johannesburg.

CRG’s 26% empowerment partner is Puno Gold Investments, a broad-based grouping.