Central Rand Gold takes DMR to court

[miningmx.com] — CENTRAL Rand Gold (CRG) is to seek an urgent interdict in the Pretoria High Court to be able to continue operations while it appeals the decision by the Department of Mineral Resources (DMR) to stop it mining.

The DMR served CRG on September 26 with a Section 47 notice cancelling its mining right.

CRG has released a statement – along with a copy of a letter to mines minister Susan Shabangu dated September 4 – in which it criticised the lack of response from the DMR to engage concerning the situation facing the company.

According to CEO Johan du Toit, “the company believes it has done all it can to satisfy the department’s requirements with the financial resources at its disposal and considering the considerable mining obstacles and operational challenges it has faced, several of which have been beyond its control.’

Du Toit said CRG had requested meetings with the DMR “on various occasions since December 2010′ to discuss its various social labour projects (SLP) but, “unfortunetaly, our requests did not lead to any meetings being held”.

According to the letter to Shabangu written by du Toit and CRG chairman Michael McMahon, ” in pursuit of closure between the vaulting ambitions of 2008 and the realities of 2011 the company has, without response, written to your department on May 19, 2011 and June 22, 2011 with a view to recognising the realities on the ground and renegotiating the detail, timing and phasing of the SLP and the EMP (environmental management programme).

“Absent response to this logical and up-front suggestion we suggest that it is not reasonable to simply issue a Section 47 notice.’

CRG cited the acid mine drainage (AMD) situation as the key factor “beyond its control’.

It said the “failure of affected and interested parties (including government) to agree terms to keep the pumping system at the SWV shaft of ERPM resulted, in 2009, in the summary closure of the shaft and the flooding of the pump chamber”.

CRG added, “the loss of this facility, which was keeping the underground water table at 900m below surface, is the sole reason for the current AMD crisis in respect of the Central Rand basin.

“Pending resolution of the AMD issue, which is coming but at the cost of huge (hopefully temporary) loss of ore reserves to the company, we have been compelled to wind down mining activities until the new pumping scheme being masterminded by the Department of Water Affairs is commissioned.’

Du Toit pointed out CRG had paid R35m to acquire the submersible pumps needed to stop the rising water levels and that there were, “currently no other pumps available that can stop the rising water table”

He believed this investment should be “classified as part of the company’s social and labour commitment’ because the pumps could dewater the entire Central Rand basin.

One of the grounds cited for cancelling CRG’s mining right was that the company had committed to spend R32.9m on SLP in the first two years but had only spent R18.8m.

“…the company believes it has done all it can to satisfy the department’s requirements with the financial resources at its disposal.”

The other grounds were failure to comply with the approved mining work programme and failure to comply with the approved EMP.

CRG gave a presentation to the DMR on August 24 in which it said, “the company acknowledges that the ambitious plans on which it was founded, and which formed the basis of the mining right application, have not materialised as anticipated.

“The major reasons fall into three categories: beyond our control, beyond our reasonable expectation and disappointing mining realities.’


But that reply also contained what has to be viewed as an indictment of the quality of the information given to investors in the documentation for the original 2007 listing.

The original mine plan called for the use of mechanised cut-and-fill mining.

But Du Toit and McMahon told Shabangu that, “the anticipated efficiencies from this simple and efficient system were the basis for the expectation that the first mine at CMR East could produce at an annualised rate of 100,000oz per annum.

“Regrettably, detailed analysis based upon conditions as actually pertained underground proved that there would be too much waste dilution, and support costs would be too high, for this to be practical.’

CRG shares traded as high as R20 in 2007. They had dropped to 9c by the end of last week and are now down to 5c.