[miningmx.com] — SHARES in embattled gold junior Central Rand Gold (CRG) inexplicably rose 15% on the JSE on Tuesday, despite news it intended shutting down underground mining operations.
Reaction in London was far more negative, knocking CRG down 28% to 1.3 pence per share.
The only reason for the optimism in Johannesburg must be the statement by CEO Johan du Toit that one of the strategic options being looked at “could lead to an offer for the entire issued share capital of the company’.
Du Toit also said: “However, this option is at an early stage and there can be no certainty that an offer for the company will be forthcoming.’
CRG had warned shareholders on February 3 about the dire situation it faced, because of delays in negotiating a solution with the government over the pumping of rising acid mine drainage (AMD) in the Central Witwatersrand which would flood CRG’s workings.
The notice published on Tuesday indicated this situation remains largely unresolved, and also reported further bad news regarding ore reserves CRG had expected to mine which have proven to be non-existent.
Since early February the government has confirmed its commitment to dealing with the AMD problem.
Despite this, Du Toit says there is still “insufficient clarity on key issues such as targeted minimum water levels, project engineering and technology, the role and responsibilities of the interested parties, cost allocation and timing to meet the degree of definition needed by the company to continue development and mining at the present rate’.
Further bad news has come from the development programme which has revealed “double voids’ in a third of the immediate area CRG planned to mine, where both the Main Reef Leader and the Main Reef had been mined out previously.
Du Toit said: “Mine planning, based on the trial mining programme of early 2009, included only for the loss – for value and void reasons – of some 10% of the ground .
“This has unsustainable consequences for the company’s cash reserves.’
In addition, operations since the beginning of March have run into serious ore dilution problems requiring changes to the mining methods.
Summing it all up, Du Toit said underground capital development operations will be suspended from the end of April. The current available stopes will be mined out, after which underground operations will be placed on care and maintenance.
Du Toit said CRG would retrench staff and hoped to be able to reassess its prospects by the end of October 2011.
