RNS Number:6773J
Central African Gold PLC
29 September 2006
Central African Gold Plc / Ticker: CAN / Index: AIM / Sector: Mining &
Exploration
Embargoed for release: 07:00 29 September 2006
Central African Gold Plc ("CAG" or "the Company")
Proposed Acquisition of the Bibiani gold mine and
related assets and licences in Ghana
Proposed Placing of up to 210,000,000 Ordinary Shares
Re-admission of Existing Ordinary Shares
and Admission of Placing Shares to trading on AIM
Notice of Annual General Meeting and Notice of Extraordinary General Meeting
Central African Gold Plc, the AIM listed gold mining and exploration company, is
pleased to announce an update on its acquisition of the Bibiani gold mine and
related assets and liabilities, including licences in Ghana from AngloGold
Ashanti Limited ("AngloGold Ashanti") and the parallel fund raising. The
transaction is part of the Company's aggressive growth strategy implemented by
the new Board, aimed at rapidly building CAG into a significant African gold
producer with extensive world class exploration and production assets.
Overview
* Conditionally agreed to acquire the Bibiani gold mine and the 19.3km(2)
Bibiani North Prospecting Licence ("PL") in Ghana from AngloGold Ashanti for
a cash consideration of US$40 million with US$4 million contingent on the PL
* Placing to raise up to a maximum of #25,200,000 (US$47,862,360), before
expenses, through the issue of up to 210,000,000 Placing Shares at 12 pence
per share, to fund acquisition and secure production and development
* The Bibiani gold mine is situated in the Sefwi-Bibiani Greenstone Belt,
one of the most prospective belts in Ghana
* Provides the Company with immediate production and revenue generation
* Re-establishment of hard rock mining operations and development of new
mining opportunities on the Mining Lease and Prospecting Licence
* Proven and Probable Reserves of 260,000 ounces of contained gold
* Measured and Indicated Resources of 20,533,000 tonnes at 1.11g/t Au for
733,000 ounces and total Inferred Resources of 4,600,000 tonnes at 4.2g/t Au
for 624,000 ounces of contained gold (JORC Compliant)
* A well maintained 2.7 million tonnes per annum processing facility is on
site (built 8 years ago at a cost of circa US$50m)
* Intention is to increase production at Bibiani following re-commencement
of an underground production programme in the second half of 2007
* Objective is to establish a leading mid-tier operating gold company, with
an initial target of 200,000 ounces of annualised low-cost gold production
and 7.5 million ounces of resource by the end 2008
* Licences in Mali and Botswana provide exploration targets in geologically
attractive gold regions - exploration ongoing
* Highly experienced Board in place with strong and respected team driving
business forward - continually looking for new opportunities to increase
project portfolio
Greg Hunter CAG Chairman and CEO said: "This acquisition represents a
significant step in the evolution of the Company as it will transform it into a
producer and provide it with significant exploration potential as well as a
valuable foothold in Ghana, a major gold producing African country. We have
already acquired and are progressing our exploration properties in Mali and
Botswana and we are considering other potential acquisitions in Africa. Our
objective is to establish CAG as a leading mid-tier operating gold company, with
an initial target of 200,000 ounces of annualised low-cost gold production and
7.5 million ounces of resource in 2008.
"The Bibiani gold mine has yielded in the order of 4 million ounces of gold from
a combination of opencast and underground mining. The Bibiani North prospecting
licence is contiguous with the current mining lease and new structural
interpretation has already generated multiple exploration targets.
"The CPR prepared by Snowden, estimates the total Measured and Indicated
Resources at Bibiani of 20,533,000 tonnes at a grade of 1.11g/t Au for 733,000
ounces of contained gold. The total Inferred Resources at Bibiani are 4,600,000
tonnes at a grade of 4.2g/t Au for 624,000 ounces of contained gold. Snowden
considers that we can apply a re-modelling of the orebody and conduct targeted
drilling to the existing resources to raise the confidence level and increase
the resource base. Snowden believes that the current resource statement does not
fully represent the opportunity that exists on the mining lease and prospecting
licence. Snowden concur that the Bibiani gold mine, as an underground operation,
represents a viable mining venture.
"We have three primary objectives for the asset including the re-establishment
of hard rock mining operations and development of new mining opportunities.
Firstly we will continue with the re-treatment of the current tailings at a rate
of approximately 4,000 ounces of gold recovered per month, secondly we
anticipate commencement of underground mining operations during the third
quarter of 2007, with a build up to an initial target tonnage of 100,000 tonnes
per month by the third quarter of 2008. At this point it is anticipated gold
production will be at a rate of approximately 100,000 ounces per year.
"Thirdly we have already prioritised 15 initial targets and a detailed
exploration programme has been developed to systematically evaluate these
opportunities and identify resources in addition to the business plan and
thereby increase the current planned mine life."
The Company is proposing to raise up to a maximum of #25,200,000 before
expenses, through the issue of up to 210,000,000 Placing Shares at 12 pence per
Placing Share. The money raised will be used to fund the acquisition and secure
production and development. The Annual General Meeting and the Extraordinary
General Meeting of the Company will be held at Third Floor, Aldermary House,
10-15 Queen Street, London at 9:15 a.m. at 9:00 a.m. and 9:15 a.m.
respectively, on 23 October 2006.
The Re-admission document ("Admission Document") setting out details of the
Proposals and including a notice of the EGM, accompanied by the form of proxy,
will be posted to Shareholders today. In accordance with the AIM Rules, trading
in the Ordinary Shares on AIM was suspended on 22 August 2006 pending the
publication of this document. Such trading will recommence on the posting of the
Admission Document to Shareholders. This announcement does not constitute, or
form part of, an offer or an invitation to purchase any securities.
For further information please visit www.centralafricangold.com or contact:
Greg Hunter Central African Gold Tel: +27 82 882 4222
Hugo de Salis St Brides Media & Finance Ltd Tel: +44 (0)20 7242 4477
Simon Raggett Strand Partners Limited Tel: +44 (0)20 7409 3494
1. Introduction
On 22 August 2006, CAG announced that it had signed a binding agreement to
acquire the Bibiani gold mine and related assets, including the Mining Lease and
Prospecting Licence, as well as related liabilities in Ghana from two
subsidiaries of AngloGold Ashanti Limited. The consideration for the Acquisition
consists of a cash payment of US$40 million and the assumption of certain
liabilities associated with the Bibiani gold mine. The cash payment may be
reduced by US$4 million if the term of the Prospecting Licence, which forms part
of the assets, is not extended to a date at least 12 months from Completion of
the Acquisition. The Proposed Transaction encompasses the completion of the
Acquisition and the Placing, which is intended to finance the purchase price of
the Acquisition and provide the Company capital for future investment in
Bibiani.
Pursuant to the AIM Rules, the Proposed Transaction will constitute a reverse
takeover. It is therefore subject to Shareholder approval, which will be sought
at the Extraordinary General Meeting to be held at Third Floor, Aldermary House,
10-15 Queen Street, London at 9:15 a.m. on 23 October 2006. In addition, the
Annual General Meeting, held immediately prior to the Extraordinary General
Meeting, will provide for the submission to Shareholders of the resolutions
referred to in the notice of meeting, including election of directors,
re-appointment of auditors, receipt of accounts for the period ended 31 December
2005 and matters relating to the allotment of securities.
2. Background Information on CAG
CAG was incorporated on 26 November 2003 and admitted to trading on AIM on 26
March 2004. It was established to identify and acquire projects in the natural
resources sector with particular emphasis on gold projects in central and
southern Africa. During the period since admission to trading on AIM, the
Company has acquired and is progressing prospective exploration properties in
Mali and Botswana and has reviewed and is currently considering other potential
acquisitions in Africa. The Acquisition represents a significant step in the
evolution of the Company, as it will transform the Company into a producer and
provide it with significant exploration potential on the Mining Lease and
Prospecting Licence and a valuable foothold in Ghana, a major gold producing
African country.
3. Business Objectives and Strategy
The Company's business strategy is to effectively identify, acquire and develop
gold projects and properties in Africa. The Company's current exploration assets
are located in the major African mining countries of Mali and Botswana. The
completion of the Acquisition will give the Company a producing asset in Ghana,
another major gold producing country in Africa.
The Company's management team has extensive mining and exploration experience,
and has worked together over a number of years managing underground greenstone
gold mining operations and developing exploration portfolios.
The Company's objective is to establish itself as a leading mid-tier operating
gold company, with an initial target of 200,000 ounces of annualised low-cost
gold production and 7.5 million ounces of resource in 2008. The Company intends
to accomplish this objective through a combination of acquisitions of producing
assets and identification and development of greenfield and brownfield
exploration activities.
In addition to the Proposed Transaction, the Company will continue to
investigate other acquisition opportunities in Africa that fit into the
Company's overall strategy and objectives.
4. Current Assets
4.1 Mali
Mali is a landlocked country in north-west Africa. Despite the recent growth in
the gold mining sector, Mali is an immature mining country where modern
exploration techniques have only recently been introduced. However, the country
has become Africa's third largest gold producer and is home to some of the
lowest cost gold mines in the world.
To date, over 20 million ounces of gold have been discovered in western Mali,
with a focus in the Kedougou-Kenieba Inlier District. The Inlier is host to
AngloGold Ashanti Limited and Iamgold Corp's Sadiola and Yatela mines and
Randgold Resources Limited's recently started Loulo-Yalea operation (which has
total mineral reserves in excess of 9.9 million ounces of gold at 4.12g/t Au).
The southern Mali auriferous area, or Boure District, is host to the Morila and
Syama mines and to deposits in Bagoe, Yanfolila, Kalana and Kangaba.
Randgold-AngloGold's Morila mine has produced more than 3 million ounces of gold
since it went into production in October 2000. Additionally, the Syama deposit
was recently estimated by current owner, Resolute Mining Limited, to have a
total resource of 66.6 million tonnes at 3.0g/t Au for 6.43 million ounces of
gold.
Mali Goldfields SA
CAG entered into a joint venture with Mali Mining House ("MMH") on 19 December
2005 (amended 25 July 2006), and has an 80% interest in the joint venture
company, Mali Goldfields SA. Mali Goldfields SA holds or is to be transferred
exploration licences ("permis de recherches" or "autorisations d'exploration")
for 20 properties covering more than 2,500 km(2) of the prospective Birimian
Gold Belts in southern and western Mali. MMH is a company established by members
of the Malian Union Nationale Des Operateurs Miniers and received a 20%
free-carried interest in the joint venture company in exchange for contribution
of the initial properties. CAG is providing the technical and financial
resources necessary to progress the various projects and will be repaid for its
advances prior to payment of any dividends.
The joint venture's exploration permits, covering both the western and southern
Mali gold districts, are underlain by highly prospective Lower Proterozoic
Birimian geology. CAG has completed a due diligence phase on the properties and
has prioritized 16 properties for follow-up exploration.
In line with the Malian Mining Code, in the eventuality that a mine is
discovered of a size that triggers the statutory 10% free-carried interest of
the Malian Government, then MMH will reduce its stake by 5% and CAG will do the
same, to accommodate the Government's participation.
Expenditure by CAG in connection with Mali Goldfields SA to 30 June 2006
amounted to approximately US$174,000. CAG has committed up to US$1.5 million of
expenditure on exploration of the properties held by Mali Goldfields SA to 31
December 2007.
Songhoi Ressources SA
On 26 July 2006, CAG entered into a joint venture with the Malian exploration
company Mani SARL ("Mani") to investigate three gold exploration licences in the
prospective Kenie'ba district in western Mali. CAG will fund exploration on the
properties through a joint venture company, Songhoi Ressources SA, of which CAG
holds an 80% equity interest and Mani holds a 20% free-carried interest.
The initial programme will focus on the 154km(2) Medinandi property, which is
situated in the southern part of the Kenieba window of lower Proterozoic age
Birimian strata, roughly 150km southwest of the town of Kenieba. The property
covers the southern extension of the Senegal-Mali shear zone, a formation
associated with multi-million ounce gold deposits such as Sadiola and Loulo/
Yalea.
Whilst gold was first discovered on the permit in 1953, and was the subject of a
number of more recent exploration programmes in the late 1990s, it has remained
largely under-explored due to thick soil cover. CAG has initiated the collation
of existing geological data and has planned a systematic exploration programme
for the Medinandi property. Enhanced ASTER (Advanced Spaceborne Thermal Emission
and Reflection Radiometersatellite) imagery and structural interpretations,
coupled with multi-element soil geochemistry and geospatial information systems
("GIS") syntheses, provides the basis for target prioritisation. A number of "
walk-up" drill targets have already been identified, including validation of
previous drilling and inferred resources. It is anticipated that the drilling
programme will commence in the fourth quarter of 2006. In total, CAG has
committed approximately US$370,000 for exploration expenditure in connection
with Songhoi Ressources SA to 31 December 2007.
Like the MMH joint venture, in the event that a mine is discovered of a size
that triggers the statutory 10% free-carried interest of the Malian Government,
then Mani will reduce its stake by 5% and CAG will do the same, to accommodate
the government's participation.
4.2 Botswana
Botswana is a landlocked country in southern Africa underlain by continental
crust spanning practically the whole of the Earth's geological record. Mineral
extraction, principally diamond mining, dominates economic activity, though
tourism is a growing sector. Copper, nickel and soda ash production also play
significant, though smaller, roles in the national economy.
Golden Tau Mining
In Botswana, CAG holds its interests through a 53% stake in Golden Tau Mining
Limited ("Golden Tau"), an Australian-based exploration company, which was
acquired by the Company in May 2004 for a cash consideration of #246,060
including expenses. Golden Tau, through its Botswana-registered subsidiary, owns
the exploration rights over one prospecting licence covering the north-west
extension of the Kraaipan Greenstone Belt from South Africa into southern
Botswana. The prospecting licence relates to an area of 872km(2) in southern
Botswana and covers most of the area underlain by the Kraaipan Greenstone
Terrane, an Archaean greenstone belt that is the extension of the greenstone
belt from South Africa, which hosts significant mines such as Harmony Gold
Mining Company Limited's Kalgold Operation (4 million ounce gold resource).
Golden Tau's exploration to date in Botswana has involved geological mapping,
airborne geophysic surveys and limited percussion and diamond drilling. There
have been initial indications of gold mineralisation, although the economic
viability of these occurrences has yet to be fully ascertained. The structural
setting of the Kraaipan Greenstone Belt is complex and needs further detailed
evaluation. Golden Tau has initiated a data collation and remote sensing study,
which will lay the foundation for ascertaining targets worthy of follow-up work.
Golden Tau has just begun compiling data for the leases in Botswana. Independent
mining consultant, Snowden, considers that the Company will be able to process
efficiently this data and move into a generative phase on the relatively
unexplored prospective greenstone belts covered by the leases. The presence of
significant mineral endowment on the South African extents of the greenstone
belt together with the results of limited exploration, in the Directors'
opinions, supports the prospectivity of the leases.
5. Bibiani
5.1 The Bibiani gold mine
The Bibiani gold mine is located in western Ghana, 250km north-west of the
Ghanaian capital of Accra. The mine is in the Sefwi-Bibiani Greenstone Belt,
host to over 17 million ounces of gold mineral resources and the second-most
significant gold-bearing belt in Ghana, after the Ashanti Belt to the east. The
main Bibiani orebody was discovered in 1902, and has since yielded in the order
of 4 million ounces of gold from a combination of opencast and underground
mining. The underground mining operations, which took place between 1927 and
1968, reportedly produced 7 million tonnes at an average recovered grade of 9g/t
Au for 2 million ounces of gold.
Ashanti Goldfields Limited, a predecessor of AngloGold Ashanti Limited,
purchased the Bibiani gold mine in June 1996 for a purchase price of US$125
million and subsequently invested US$80 million in capital to develop the
project. A 2.7 million tonne per annum processing facility was commissioned in
1997 at a cost of US$51 million. In the opinion of the Directors, based on their
visit to the site, the processing facility has been well maintained. Open-pit
operations were carried out between 1998 and 2005 and have produced over 1.8
million ounces of gold, bringing total gold production from the mine to over 3.8
million ounces. The main Bibiani pit was closed due to a geotechnical sidewall
failure in 2005 and since then AngloGold Ashanti Limited has largely been
processing tailings at the site.
5.2 Bibiani North
The Bibiani North (Donkota-Ansuontaa) Prospecting License is located in the
Atwima District of the Ashanti Region, centred at 6.33 N and 2.18 W and is held
by AngloGold Ashanti Bibiani. The size of the licence is approximately 19.3km
(2). The southern boundary of the licence is about 2.5km north of the town of
Bibiani, and is contiguous with the northern extension of the Mining Lease.
Previous exploration
There have been three periods of exploration on or around the Prospecting
Licence since the early 1990's, conducted by Gencor (1992 to 1994), Echo Bay
(Ghana) Limited ("Echo Bay") (1995 to 1996) and Ashanti Goldfields Company/
AngloGold Ashanti Limited (1996 to present).
Gencor conducted surface geochemical sampling and sampled the old stopes of the
Bibiani North mine. Echo Bay effected an airborne geophysical survey, including
magnetics, radiometrics and very low frequency surveys, over the licence area.
Echo Bay also drilled 11 diamond holes. Further work on the Prospecting Licence
by Ashanti Goldfields Company, now AngloGold Ashanti Limited, was delayed until
a settlement was reached on the farm-in rights of Echo Bay, which was achieved
in the latter part of 1996. AngloGold Ashanti Bibiani was created to operate the
new Bibiani gold mine and was also given responsibility for further exploration
of the Mining Lease and the Prospecting Licence. AngloGold Ashanti Bibiani
renewed the licence on behalf of Atwima Amanano Goldfields in 1997/1998.
AngloGold Ashanti Bibiani bought out Atwima Amanano Goldfields in 2000 after
which the licence was again renewed in May 2001. AngloGold Ashanti Bibiani has
been responsible for conducting exploration activities on the Prospecting
Licence to date.
The principal work carried out by AngloGold Ashanti Bibiani on the Prospecting
Licence from 1997 to 2001 includes soil sampling, aerial photography and
drilling. AngloGold Ashanti Bibiani's exploration has tailed off since 2003.
However, in 2005 an integrated GIS study was undertaken to further delineate
exploration targets. The target generation exercise utilised all available data
(geophysical, soil geochemistry) and comparisons with known occurrences. An
assessment of the potential for further open pittable resources was made based
on a comparison of known mineralisation styles and volumes with a geological
target generation exercise. Targets were defined from each of the individual
datasets/interpretations, and were combined to produce a series of integrated
priority targets for both the Mining Lease and Prospecting Licence areas.
AngloGold Ashanti Bibiani also reviewed existing geological interpretations,
and, largely utilizing the newly acquired aeromagnetic data, completed a revised
interpretation. Several significant gold in soil anomalies were found to be
present across the licence area. AngloGold Ashanti Bibiani assessed the
relationship between the revised geology and these anomalies, and concluded that
elevated gold values frequently appear to be related to porphyritic lithologies,
similar to Redback Mining Inc.'s Chirano deposits located to the south. This was
especially evident at Pamunu North where the soil anomalies are clearly
constrained by the limit of the individual intrusions.
Preliminary work undertaken by CAG
As part of its due diligence, CAG has collated all the exploration data,
reviewed AngloGold Ashanti Bibiani's work, and subsequently undertaken its own
structural geology/GIS target generation study. This work was instrumental in
understanding the geological upside of both the Bibiani gold mine and environs
as well as the Prospecting Licence.
CAG's work has resulted in a new structural interpretation that CAG believes can
be used as a predictive tool for underground and surface exploration. This
structural model, when utilized to constrain existing exploration data,
generated six new targets as well as constraining the AngloGold Ashanti Bibiani
interpretations. Further collation of all the satellite pit drilling has
provided a basis for a systematic and phased exploration programme on the Mining
Lease and the Prospecting Licence. Fifteen targets that overlap have now been
prioritized for follow-up work. The exploration programmes include a combination
of infill soil sampling, detailed geophysical and structural geology mapping and
trenching followed by a number of phases of RC and DDH drilling, as well as
appropriate metallurgical testwork.
5.3 Further information on Bibiani resources and reserves
The CPR was prepared by Snowden as at 29 August 2006 and provides estimates of
mineral resources and reserves at Bibiani.
The mineral inventory at Bibiani comprises in situ resources associated with the
Bibiani gold mine and the satellite deposits. The inventory also comprises
stockpiles of mineralised material and tailings contained in surface storage
facilities. The total Measured and Indicated Resources at Bibiani are 20,533,000
tonnes at a grade of 1.11g/t Au for 733,000 ounces of contained gold. The total
Inferred Resources at Bibiani are 4,600,000 tonnes at a grade of 4.2g/t Au for
624,000 ounces of contained gold. The Bibiani and satellite resources are quoted
at cut-off grades of 2g/t Au and 0.75g/t Au, respectively. Snowden has reviewed
the classification and found it to be in accordance with the JORC Code (2004).
Snowden considers that CAG can add to the resource base at the Bibiani gold mine
and the satellite deposits through the development of applied geological
knowledge to the existing geological models, and then apply targeted drilling to
the existing resources to raise the confidence level and increase the resource
base. Snowden considers there is an opportunity to improve the resource estimate
by reinterpreting the data to incorporate lithological and structural data. This
will aid in understanding controls on the mineralisation at Bibiani and assist
in optimizing drill programmes to define additional resources. It is also
recommended that the model be extended at depth as mineralization has been
intersected in drillholes 200m below the base of the model. Snowden considers
that there is substantial value to be added to the resource by developing a
lith-structure framework for the resource estimate.
The reserves at Bibiani comprise in situ resources associated with the Bibiani
gold mine and the old tailings facilities. Reserve estimates have been generated
by AngloGold Ashanti Limited and CAG staff for the tailings material, while
Snowden reviewed the underground resources and provided an estimate of in situ
reserves. At this stage, Snowden is not prepared to classify the in situ ore
reserves higher than into the Probable category in accordance with the JORC Code
due to some uncertainties described in the CPR. Ore reserves are summarized in
the following table:
Deposit Classification Tonnes Grade (Au g/t) Metal Ounces (Au)
Glamco tailings Proved 2,613,000 1.05 88,000
Glamco tailings Probable 364,000 0.94 11,000
Sub-Total Tailings 2,977,000 1.03 99,000
Bibiani in situ Probable 1,243,000 1.02 161,000
Total Proved and Probable 4,220,000 1.92 260,000
Snowden prepared a valuation for the Bibiani gold mine in the CPR, based on the
resources and reserves discussed in the CPR. The financial model quantifies the
revenues, costs and capital expenditure over the life of the mine. A discounted
cash flow model was constructed based on post tax/pre-finance real cash flows
for the Bibiani gold mine. Three distinct scenarios were assessed based on
various development and production schedules, as well as the respective capital
requirements accompanying them.
Snowden concludes that the project cash flow based on sound technical input
parameters and estimated projections shows that all three of the scenarios
considered in the CPR will be cash flow positive for the full life of the mine.
Net present values for the three scenarios are positive across a range of
discount rates (8%, 10% and 12%). It is Snowden's opinion that the Bibiani gold
mine, as an underground operation (drawing initially from material contained in
tailings dumps), under current gold prices, represents a viable mining venture
that will continue to enhance social conditions in the Bibiani area in Ghana,
whilst achieving CAG's corporate objectives.
5.4 Plans for Bibiani
CAG's team of experienced mining and geoscience professionals will utilise their
expertise and techniques to achieve the Company's objectives of increasing
production and the resource base from both the current Mining Lease and the
Prospecting Licence. CAG has three primary objectives for the re-establishment
of hard rock mining operations and development of new mining opportunities on
the Mining Lease and Prospecting Licence:
* Geological remodelling of the Bibiani orebodies - CAG intends to increase
Bibiani's resource base from its stated inventory of gold as at 31 December
2005 of 100,000 ounces of ore reserve and 900,000 ounces of mineral resource
(JORC compliant), as stated in AngloGold Ashanti Limited's audited 2005
accounts. Work has commenced on compiling the existing data for the purpose
of a comprehensive geological re-interpretation. The AngloGold Ashanti
Limited model of the Bibiani orebodies was established on an 'ore outline'
grade cut-off of approximately 3g/t Au without the geological structure
having been modelled. Further, the existing modelling has not contemplated a
bulk underground mining scenario. There are contiguous mineralised drill
intersections that presently are not included in the model of the stated
resources. The immediate re-interpretation of data by CAG will serve two
main purposes: firstly, re-stating the resources should result in an
increased resource base that is in line with the Company's business plan and
intention to develop the main underground operation; and secondly, a full
understanding of the data density in the model will enable a prioritization
of underground drilling and sampling for conversion of resources to reserves
and identification of new resources. Detailed mine planning and scheduling
will be updated in accordance with the new model.
* Immediate Production - CAG will continue with the re-treatment of the
current tailings at a rate of approximately 4,000 ounces of gold recovered
per month. The Company will commence with a phased capitalization of the
underground mining operations as soon as practicable after Completion. The
CAG business plan sees underground production commencing during the third
quarter of 2007 with a build up to an initial target tonnage of 100,000
tonnes per month by the third quarter of 2008 where at this point it is
anticipated gold production will be at a rate of approximately 100,000
ounces per year. CAG's development program will extend the existing decline
from 9 level to 14 level together with the construction of a new decline
from surface to 14 level, which will both mitigate the risk of a single
access operation and will provide a dedicated low cost conveyer haulage of
ore to the Run of Mine stockpile at the plant. CAG's mining team have
inspected the existing underground excavations and have determined a wide
long hole stoping mining method as appropriate for the orebody and believe
this is achievable given the team's experience in this style of mining. A
pay-limit of under 2g/t Au enables stope widths of between 10m and 40m which
has been planned against the existing measured and indicated and converted
inferred resources.
* Exploration - CAG is of the view that there is considerable upside on both
the Mining Lease and Prospecting Licence. The Company has utilized its
in-house skills and proprietary technology to complete a target generation
study over the properties which has highlighted 15 initial targets that have
been prioritized. A detailed exploration program has been developed to
systematically evaluate these opportunities. The Company's exploration and
structural geology expertise will be focused initially on resource
conversion in line with achieving milestones relating to the underground
production plan. A deep surface drilling program has been planned to
establish geological continuity of the upper level mineralisation of the
main Bibiani orebody and this is expected to identify resources in addition
to the business plan and thereby increase the current planned mine life.
Concurrently with the initial focus on underground resources, the Company
will evaluate satellite oxide resources that exist and could in short order
provide an ore source to augment the current tailings production.
CAG's proposed mine plan for the re-establishment of underground operations at
Bibiani involves accessing the main orebodies currently in close proximity to
the existing ramp and level infrastructure developed by the previous owners
since 2002. The width, extent and continuity of the defined orebodies lends to
longhole open stoping as the mining method of choice. Underground inspection of
old stopes confirms that rock mass conditions are suitable for this method.
6. The Proposed Transaction
Under the terms of the Acquisition Agreement, CAG has agreed to purchase, and
the Vendors have agreed to transfer to a subsidiary of CAG, the entire business
conducted by the Vendors at the Bibiani gold mine in Ghana as a going concern,
including the assignment of the Mining Lease and (subject to extension) the
Prospecting Licence.
CAG has agreed to pay the Vendors an aggregate cash purchase price of US$40
million at Completion and shall assume certain on-going liabilities associated
with the Bibiani gold mine. US$4 million of the cash purchase price is
contingent on the duration of the Prospecting Licence being extended by the
government of Ghana to a date at least 12 months from the closing date of the
Acquisition. CAG has deposited in escrow US$1 million, which is payable, in
certain circumstances, to the Vendors if the resolution approving the
Acquisition is not passed by Shareholders or CAG is unable to raise sufficient
funds to comply with its obligations under the Acquisition Agreement. Completion
is contingent upon satisfaction of a number of conditions precedent, including
certain approvals and consents of the Government of Ghana, consent of the Ghana
Mineworkers Union to the cession and delegation of the collective bargaining
agreement at the Bibiani gold mine to CAG's subsidiary, CAG raising sufficient
funds, and approval of the Acquisition by Shareholders.
Further information in respect of the Acquisition Agreement is given in the
Material Contracts Summary included in paragraph 11 of Part VI of the Admission
Document. The Company plans to raise up to #25,200,000 (US$47,862,360) by the
issue of up to 210,000,000 Placing Shares at a Placing Price of 12 pence per
share to provide funds to pay the balance of the purchase price for the
Acquisition, to develop the Bibiani gold mine and for general working capital
purposes. It is expected that Admission of the Placing Shares will take place on
the day of Completion, which is expected to occur on or around 1 November 2006
(subject to satisfaction of the conditions precedent). The Placing is described
further in paragraph 9 below.
7. Current Trading and Prospects
During the period since 31 December 2005, the Company has continued to implement
its business strategy, through significant work on its projects in Mali and
Botswana and exploration of other potential acquisitions and permit
opportunities.
Management of the Company was strengthened in March of this year through the
addition of Greg Hunter, as Chief Executive Officer, and Mark Rosslee, as
Financing Director, supported by a strong technical team bringing expertise in
geology and exploration, engineering and metallurgy and corporate and financial
issues. All of the team have extensive experience and relationships throughout
Africa and are familiar with the challenges and opportunities of the continent.
The Company's balance sheet was strengthened by an institutional placing in
April which raised approximately #9 million and introduced a number of
significant institutional shareholders to the Company's Shareholder base.
The Acquisition represents a significant step in the evolution of the Company,
as it will transform the Company into a producer and provide it with significant
exploration potential on the Mining Lease and Prospecting Licence and a foothold
in Ghana, a major gold producing African country.
In addition, the Company has continued to evaluate and consider a number of
other acquisitions and licensing opportunities in Africa to enhance the
Company's existing holding and advance its strategic objectives.
Additional details of developments over the past year can be found in the
Company's annual financial statements for the year ended 31 December 2005 and
interim financial statements for the six months ended 30 June 2006 contained in
Part IV of the Admission Document.
10. Details of the Placing and Use of Proceeds
The Company is proposing to raise up to #25,200,000 (US$47,862,360), before
expenses, through the issue of up to 210,000,000 Placing Shares at 12 pence per
share. The Placing, which is not underwritten by Hichens, will be conditional
upon, inter alia:
a) the Placing Agreement not being terminated by either Hichens or Strand in
respect of a material breach thereof by the Company;
b) the Placing not raising less than #21,000,000;
c) approval by the Shareholders of the Acquisition at the Extraordinary
General Meeting;
d) the Company notifying Hichens and Strand that the conditions precedent to
Completion under the Acquisition Agreement have been satisfied or waived;
and
e) the London Stock Exchange having agreed to admit the Placing Shares to
trading on AIM at 8.00 a.m. on 1 November 2006 (or such later date as the
Company, Strand and Hichens may agree but in any case no later than 31
December 2006).
The Placing is expected to be made by means of a placing of Ordinary Shares to
certain institutional investors in the United Kingdom and elsewhere.
Assuming the maximum Placing, the Placing Shares will represent 44 per cent. of
the Enlarged Share Capital. Therefore, Shareholders who do not participate in
the Placing will be diluted to that degree if the maximum Placing is made.
The net proceeds of the Placing, assuming the maximum Placing, are estimated to
amount to #24,350,000 (US$46,247,955), of which US$39,000,000 (#20,533,881) will
be utilized to pay the balance of the purchase price under the Acquisition
Agreement. The Directors expect to place at least 175,000,000 Placing Shares,
which would raise #21,000,000 (US$39,885,300). The Directors expect that the
existing cash assets of the Company will be utilized, along with the balance of
the net proceeds of the Placing, to develop the Bibiani gold mine and continue
work on the exploration properties. Any remaining funds will be applied to
provide funds for general working capital purposes and to finance the
investigation and execution of strategic acquisitions.
The Placing Shares, on issue, will rank pari passu in all respects with the
Existing Ordinary Shares. The Placing will be conditional upon the conditions
set out above being satisfied by 31 December 2006. However, the Company
anticipates that the conditions will be satisfied earlier. Assuming that the
conditions are satisfied by 23 October 2006, it is anticipated that the Placing
Shares will be issued shortly thereafter. On this basis, dealings in the Placing
Shares will commence and CREST accounts would be credited by 1 November 2006 and
certificates dispatched by 8 November 2006.
9. Board of Directors
Mr. Gregory David Hunter, Chairman and Chief Executive Officer, aged 42
Gregory Hunter, who has a B.Sc in Mining Engineering, has worked extensively in
the resource sector in both financial and technical capacities. He was formerly
Chief Executive Officer of Southern African resource company Metallon Gold and a
director of Ridge Mining plc. Prior to this, he was a rated analyst and head of
mining research at Deutsche Securities, focusing primarily on the gold and
platinum sectors. Mr. Hunter also spent two years at UAL Merchant Bank and a
number of years with AngloGold Limited.
Mr. Mark William Rosslee, Finance Director, aged 44
Mark Rosslee, a Chartered Accountant with a graduate diploma in Mining
Engineering, was Finance Director of Metallon Gold, having been the Chief
Financial Officer at both SouthernEra Diamonds Inc. and Southern Platinum Corp.
He gained extensive experience in the mining industry with the De Beers Group at
both a corporate and operational level over a period of 12 years.
Mr. Roy Aubrey Pitchford, Non-executive Director, aged 56
Roy Pitchford has more than 20 years' senior management and executive experience
in Southern Africa, 13 years of which were in the mining industry. He was Chief
Executive Officer of Cluff Resources Zimbabwe Limited, Delta Gold Zimbabwe (Pvt)
Limited and Zimbabwe Platinum Mines Limited ("Zimplats"), which was listed on
the Australian Stock Exchange. He is also a Past President of the Chamber of
Mines of Zimbabwe. Roy was closely involved in building Zimplats and creating a
company with a platinum group metal resource base in excess of 300 million
ounces. This included taking the Ngezi opencast platinum mine into production
and the re-commissioning of the Selous Metallurgical Complex at the end of 2001.
He was also closely involved in Impala Platinum Holdings Limited's acquisition
of Zimplats in September 2005.
Mr. Hunter and Mr. Rosslee were appointed to the Board on 8 March 2006 and their
current term of office expires at the Annual General Meeting. Mr. Pitchford was
appointed to the Board on 1 January 2004 and his current term of office expires
at the Annual General Meeting. The resolutions at the Annual General Meeting
will propose the Directors' re-election to the Board.
10. Lock-ins and Orderly Market Arrangements
Pursuant to the terms of the Placing Agreement, Mr. Pitchford has agreed not to
transfer the Ordinary Shares in which he has an interest for a period of one
year from the date of Admission. No other lock-in agreements have been entered
into by Directors or other related parties under the AIM Rules.
11. Dividend Policy
The Company has not paid any dividends since its incorporation. The Directors
intend to devote the Company's cash reserves to exploration and development
activities in the short to medium term and intend to commence the payment of
dividends only when they consider it to be commercially prudent to do so, having
regard to the availability of the Company's distributable profits and the
retention of funds required to finance future growth.
12. Annual General Meeting and Extraordinary General Meeting
The Admission Document appends notices convening the Annual General Meeting and
the Extraordinary General Meeting of the Company, to be held at Third Floor,
Aldermary House, 10-15 Queen Street, London at 9:00 a.m. and 9:15 a.m.,
respectively, on 23 October 2006.
The following resolutions will be proposed at the Annual General Meeting:
1) to authorise the Directors pursuant to section 80 of the Act to allot
relevant securities including, amongst others, the Placing Shares;
2) to receive the accounts of the Company for the period ended 31 December
2005;
3) to re-appoint Roy Pitchford as a director;
4) to re-appoint Gregory Hunter as a director;
5) to re-appoint Mark Rosslee as a director;
6) to re-appoint Baker Tilly as auditors and authorise the Directors to fix
their remuneration; and
7) to authorise the Directors to allot relevant securities for cash as if the
statutory pre-emption rights set out in section 89 of the Act did not apply
to such allotment.
Resolutions (1) - (6) will be proposed as Ordinary Resolutions and resolution
(7) will be proposed as a Special Resolution at the Annual General Meeting. The
resolution to be proposed at the Extraordinary General Meeting will be to
approve the Acquisition. This resolution will be proposed as an Ordinary
Resolution.
13. Admission Document
The Admission Document setting out details of the Proposals and including a
notice of the EGM, accompanied by the form of proxy, will be posted to
Shareholders today. Copies of the Admission Document will be available to the
public free of charge from today at the offices of Strand Partners Limited at 26
Mount Row, London SW1 3SQ and at Salans, Millennium Bridge House, 2 Lambeth
Hill, London EC4B 4AJ during normal business hours on any weekday (other than
Saturdays and public holidays), until one month following the date of admission.
14. Expected Timetable of Principle Events
Resumption of trading on AIM 29 September 2006
Latest time and date for receipt of Forms of Proxy 9:00 a.m. on 21 October 2006
for the Annual General Meeting
Latest time and date for receipt of Forms of Proxy 9:15 a.m. on 21 October 2006
for the Extraordinary General Meeting
Annual General Meeting 9:00 a.m. on 23 October 2006
Extraordinary General Meeting 9:15 a.m. on 23 October 2006
Re-admission of the Existing Ordinary Shares 1 November 2006*
Admission of the Placing Shares effective and 1 November 2006*
dealings commence on AIM
Closing of the Acquisition 1 November 2006*
CREST accounts credited by 1 November 2006*
Dispatch of definitive certificates by 8 November 2006*
*assuming all conditions precedent are by then satisfied or waived
All future dates referred to in the Admission Document are subject to change at
the discretion of the Company, Strand and Hichens.
* * ENDS * *
Strand Partners Limited, which is authorised and regulated in the United Kingdom
by the Financial Services Authority, is acting as nominated adviser and broker
to the Company in connection with the Acquisition, Placing and proposed
admission and re-admission of the Enlarged Share Capital to trading on AIM. Its
responsibilities as the Company's nominated adviser under the AIM Rules are owed
solely to the London Stock Exchange and are not owed to the Company or to any
Director or to any other person in respect of his decision to acquire shares in
the Company in reliance on any part of this announcement.
Strand Partners Limited is not acting for anyone else and will not be
responsible to anyone other than the Company for providing the protections
afforded to its clients or for providing advice in relation to the contents of
this announcement or the Acquisition, the Placing or the proposed admission and
re-admission of the Enlarged Share Capital to trading on AIM. No representation
or warranty, express or implied, is made by Strand Partners Limited as to the
contents of this announcement, without limiting the statutory rights of any
person to whom this announcement is issued. The information contained in this
announcement is not intended to inform or be relied upon by any subsequent
purchasers of Placing Shares (whether on or off exchange) and accordingly no
duty of care is accepted in relation to them.
Strand Partners Limited has approved the contents of this announcement solely
for the purpose of section 21 of the Financial Services and Markets Act 2000.
The principal place of business of Strand Partners Limited is 26 Mount Row,
London W1K 3SQ.
The Directors of Central African Gold Plc, accept responsibility, individually
and collectively, for the information contained in this announcement and for
compliance with the AIM Rules.
This announcement does not constitute, or form part of, an offer or an
invitation to purchase any securities.
DEFINITIONS
The following definitions apply throughout this announcement, unless the context
requires otherwise:
"Acquisition" the proposed acquisition of Bibiani by a wholly-owned subsidiary of
the Company pursuant to the Acquisition Agreement
"Acquisition Agreement" the agreement dated 22 August 2006 between the Company and the
Vendors relating to the Acquisition
"Act" the Companies Act 1985, as amended
"Admission" the re-admission of the Existing Ordinary Shares to trading on AIM
and the admission of the Placing Shares to trading on AIM becoming
effective in accordance with the AIM Rules
"AIM" the market of that name operated by the London Stock Exchange
"AIM Rules" the rules for AIM companies as published by the London Stock Exchange
from time to time
"AngloGold Ashanti AngloGold Ashanti (Bibiani) Limited, a wholly-owned subsidiary of
AngloGold Ashanti Limited
Bibiani"
"AngloGold Ashanti Ghana" AngloGold Ashanti (Ghana) Limited, a wholly-owned subsidiary of
AngloGold Ashanti Limited
"Annual General Meeting" the annual general meeting of the Company to be held at 9:00 a.m. on
23 October 2006, notice of which is attached to the Admission
Document
"Bibiani" the Bibiani gold mine and related assets and mining and prospecting
licences located in Ghana
"Board" or "Directors" the board of directors of the Company
"Combined Code" the "Combined Code on Corporate Governance" published in July 2003 by
the Financial Reporting Council
"Company" or "CAG" Central African Gold plc
"Completion" completion of the Acquisition in accordance with the Acquisition
Agreement
"CPR" the competent person's report relating to the current operations of
the Company and the Bibiani gold mine prepared by Snowden dated 29
August 2006
"Enlarged Share Capital" the Ordinary Shares in issue immediately following Admission
(excluding any Ordinary Shares that may be issued pursuant to the
exercise of any options or warrants prior to Admission)
"Existing Ordinary Shares" the 265,751,023 Ordinary Shares in issue at the date of the Admission
Document
"Extraordinary General Meeting" the extraordinary general meeting of the Company to be held at 9:15
a.m. on 23 October 2006 (or such later time on that date as the
Directors may determine after the Annual General Meeting has
concluded), notice of which is attached to the Admission Document
"Forms of Proxy" the forms of proxy which accompany the Admission Document for use by
holders of Existing Ordinary Shares in connection with each of the
Annual General Meeting and the Extraordinary General Meeting,
respectively
"FSMA" the Financial Services and Markets Act 2000
"Ghana" the Republic of Ghana
"Golden Tau" Golden Tau Mining Limited, an Australian-based exploration company in
which the Company has a 53% interest
"Hichens" Hichens, Harrison & Co. Plc, nominated broker to the Company
"London Stock Exchange" London Stock Exchange plc
"Mani" Mani SARL, a Malian exploration company and holder of a 20% interest
in Songhoi Resources SA
"Mining Lease" the 30 year mining lease entered into on 19 May 1997 between the
State of Ghana and AngloGold Ashanti Bibiani, in respect of the area
of approximately 49.82km2, located at Bibiani in the Western Region
of Ghana
"MMH" Mali Mining House, a company established by members of the Malian
Union Nationale Des Operateurs Miners and holder of a 20% interest in
Mali Goldfields SA
"Ordinary Shares" ordinary shares of 0.1 pence each in the capital of the Company
"Placees" the subscribers of Placing Shares pursuant to the Placing
"Placing" the conditional placing by the Company of the Placing Shares
"Placing Agreement" the conditional agreement dated 28 September 2006 between the
Company, the Directors, Strand and Hichens
"Placing Price" 12 pence per Placing Share
"Placing Shares" the up to 210,000,000 Ordinary Shares which are the subject of the
Placing
"Proposed Transaction" the Acquisition and the Placing
"Prospecting Licence" the prospecting licence held by AngloGold Ashanti Bibiani, originally
issued on 27 June 2004 and most recently extended on 4 May 2006 to 31
December 2006, in respect of the area of approximately 19.3km(2),
located at Bibiani North in the Western Region of Ghana
"Shareholders" the holders of Ordinary Shares of the Company
"Snowden" Snowden Mining Industry Consultants (Pty) Limited
"Strand" Strand Partners Limited, nominated adviser to the Company
"Vendors" AngloGold Ashanti Bibiani and AngloGold Ashanti Ghana
This information is provided by RNS
The company news service from the London Stock Exchange
END
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