RNS Number:7778E
Central African Gold PLC
28 September 2007
Central African Gold Plc / Ticker: CAN / Market: AIM / Sub-sector: Gold Mining
28 September 2007
Central African Gold Plc ("CAG" or "the Company")
Interim Results
Central African Gold Plc, the AIM traded gold mining and exploration company,
announces its interim results for the six months ended 30 June 2007.
Overview
* Production build-up at flagship Bibiani gold mine in Ghana has been
initiated
* Increased total global mineral resource estimate by 300% at Bibiani -
confirms belief that the Main Zone orebody sustains a multi-million ounce
deposit
* Increased Ore Reserve estimate at Bibiani circa fourfold to 1.05 million
oz Au
* Production at Bibiani for year ending 31 December 2007 expected to be
circa 40,000 oz Au - aim to increase this to an annualised rate of 100,000
oz Au by the end of 2008
* Evaluating feasibility of increasing Bibiani output to 150,000+ oz Au pa
in the medium term
* Continued exploration work at permits in western and southern Mali with
promising results
* Broadened geographical reach via an acquisition of gold mine assets in
Zimbabwe
Chairman's Statement
It gives me great pleasure to report on the Company's progress towards
fulfilling its objective of becoming a leading mid-tier gold producer with a
world class portfolio of exploration and production assets. This has been a
very active period where we have advanced the development of our flagship
project, the Bibiani gold mine ("Bibiani") in Ghana: increased both the total
global mineral resource estimate by 300% and our Ore Reserve estimate by 391%;
continued exploration work at our permits in western and southern Mali with
promising result, broadened our geographical focus via an acquisition of gold
mine assets in Zimbabwe and strengthened the management team. As a result, I
believe we have the foundations in place to continue increasing both our
resource and reserve base and production levels at Bibiani to an initial
annualised rate of 100,000 oz Au by the end of 2008 and to 150,000+ oz Au pa in
the medium term.
Bibiani - Ghana
Our primary focus has been to develop and progress our operations at the Bibiani
gold mine in Ghana. Since CAG took over management of Bibiani in December 2006,
a Reverse Circulation ('RC') and Diamond Core Drilling ('DD') programme has
progressed, testing extensions to the Main Zone of the Bibiani orebody and
satellite oxide pits. In July this year we announced a threefold increase in
our underground resource estimate for the Bibiani orebody, with the underground
mineral resource estimate at the Bibiani Main Zone increasing by 288% to 2.68
million oz Au and total global mineral resources increasing by 300% to 3.23
million oz Au. Furthermore, our global underground resource estimate is in
excess of 2.5 million oz Au grading 2.66 g/t Au, which provides a good
indication and strong basis for sustainable mineral resource to ore reserve
conversion. It also increases the Board's confidence in the potential for the
advancement of an economically sound long-life underground mining operation.
In addition, post period end, we were pleased to report a circa fourfold
increase (391%) in our underground Ore Reserve estimate to 1.05 million oz Au,
following the revised mineral resource estimation announced in July. The
increase in Ore Reserves is a direct result of continued geological assessment,
refined mineral resource estimation procedures, as well as the optimisation of
mine planning and scheduling of the orebody.
The Ore Reserve estimate further underpins the Board's confidence in the
potential for the development of a viable underground mining operation with at
least a ten year production life. Currently we are conducting a feasibility
study to assess extracting the reserves at a higher rate than our initially
planned 100,000 tonnes per month ('tpm'). The engineering design specifications
for the conveyor system in the conveyor decline is for 200,000 tpm and the
process plant is capable of treating 225,000 tpm. With growing confidence in the
sustainability of the orebody, we feel there is a real opportunity to increase
our annualised ounce production to over 150,000 oz Au.
We have also focussed on the production of tailings from the project. Production
for the year ending 31 December 2007 is expected to be circa 40,000 oz, less
than the targeted 50,000 oz previously reported, principally due to shortfalls
of local power supplies and the breakdown of key equipment associated with the
tailings operation, which has taken longer than anticipated to replace. However,
we are now installing our own independent electricity generating capacity for
the underground project, which should help us overcome these problems in the
future and ensure we are self sustaining. Importantly, we have also outsourced
the tailings treatment to leading tailings specialist, Fraser Alexander Group,
enabling us to focus on the long term value proposition for the Company, the
underground project, and ensuring that it is delivered on time and within
budget.
Positive developments on site continue. The bulk of the mining fleet has now
been delivered, and a team of local and expatriate underground bulk mine
specialists have been hired to manage the project. First trial underground
blasting and progress on ventilation raises were completed ahead of schedule,
which allowed general mine development work to begin. Furthermore, stoping,
which will open up the underground mine in preparation for its production, is
expected to begin imminently. An additional important milestone was achieved
recently with the start of the construction of the portal for the conveyor
decline.
Promising work also continues on the Mining Lease and the two prospecting
licences belonging to the Company.
Bibiani has continued to fulfil its potential in providing us a multi-million
ounce gold resource with global underground resources now standing at just under
three million ounces.
Mali
We have built a strong position in Mali through joint venture agreements and
have assembled a highly prospective portfolio of assets consisting of 22
properties spanning over circa 2,500 sq km in the south and west of the country.
We have identified five priority target properties where we are currently
conducting extensive exploration programmes. Due to our increasing activity
levels, we have appointed Richard Dahl as our Mali Exploration Manager to manage
operations and lead a team of highly experienced professionals.
Results from our first phase of systematic gold exploration at our properties in
the prospective Birimian strata in southern and western Mali have been highly
encouraging. Over 10,700 assays have been completed to date with 39 follow-up
gold targets identified, of which 16 are being prioritised. Six are clustered
and structurally controlled gold anomalies and most notably, in the Yanfolila
district, we have identified a number of 2-7 km long clustered gold-in-soil
anomalies.
At our 154 sq km Medinandi permit within the prospective Kenieba district we
have concluded a successful field season. Exploration work has delivered a
resource estimate of circa 500,000 oz Au grading 4.55 g/t Au, which reinforces
our belief that the area is highly prospective and may have significant
production potential. Further gold anomalies for follow-up have also been
identified with drilling work scheduled for Q4 2007 after the rainy season.
Zimbabwe
In February 2007, CAG acquired an 84.7% interest in Falcon Gold Zimbabwe Limited
and the entire issued share capital of Olympus Gold Mines Limited, two
Zimbabwean based gold operations for an aggregate consideration of approximately
#3.1 million (US$6.2 million). The supply of electricity has been somewhat
erratic, which has had an effect on production, but we are looking at solutions
to overcome this. We are currently implementing comprehensive investment
programmes aimed at increasing production although I feel that last year was a
fantastic achievement considering the situation on the ground. We anticipate
producing in the order of 20,000 oz Au in FY 2007.
We continue to be positive about the long-term prospects for Zimbabwe. The
country is resource rich and, with this foothold, I believe we are in a position
to take advantage of the country's potential. For the period under review, CAG
has invested #0.5 million into Zimbabwe via a #1.5 million loan structure
approved by the Reserve Bank of Zimbabwe, for the recapitalisation and expansion
of these assets. Two assets in particular, Camperdown and Dalny, have
significant potential and it is our intention to fast-track an exploration and
development programme on these properties should the investment climate in the
country be such that we are comfortable to commit significant amounts of
shareholder funds.
The situation with regards to mine ownership has yet to be resolved, with active
and encouraging dialogue taking place between the mining industry and the
various state bodies involved in the process. Promising signs of a policy
acceptable to the mining industry have begun to emerge.
Botswana
We are in the process of increasing our 53% stake in Golden Tau Mining Ltd,
which owns the exploration rights to a circa 400 sq km permit over the
prospective Kraaipan greenstone belt in southern Botswana and the Company
expects to make an announcement relating to this in due course. Exploration to
date includes geological mapping, airborne geophysical surveys and limited
percussion and diamond drilling. Results have indicated gold mineralisation but
the economic viability is yet to be determined.
Financial Review
During the period to 30 June 2007 turnover was #6.1 million from gold sales,
with a gross profit of #0.4 million. A price of US$661 per ounce was achieved
from the sale of 18,140 ounces which were produced at a cash cost of US$574 per
ounce.
Operating summary statistics
Ghana Zimbabwe* Group
Sold Ounces 13,706 4,434 18,140
Produced Ounces 13,600 4,434 18,034
Cash costs US $ per oz 545 663 574
* 4 month
period
Administrative expenses were #1.28 million (June 2006: #1.25 million) and the
operating loss for the period was just under #1.5 million (June 2006: #3
million) or a loss of 0.32p per share (June 2006: 1.44p per share), an
improvement of just over 60%, including share based payments of #0.4 million.
Total assets increased to #34.5 million (June 2006: #9.5 million) mainly due to
the increased investments in Ghana and Zimbabwe as well as the capital expansion
at Bibiani and exploration in Mali. Liabilities increased to #10.6 million, due
mainly to the debt facility drawdown which has funded the capital expansion at
Bibiani.
Cash at the end of the period decreased by #1.5 million to #3.7 million, of
which #1.4 million is restricted to fund the rehabilitation liability at
Bibiani.
Outlook
The past six months have seen many positive developments for CAG and I see no
reason for this rapid pace of growth not to continue. Whilst our focus remains
on the development of Bibiani, we continue to evaluate additional African
prospects in Mali, Ghana, DRC, South Africa and Zimbabwe. We remain committed
to generating good returns for our shareholders and are very excited about the
future of the Company. I would like to take this opportunity to thank our staff
and shareholders for their continued support and we expect to report further
progress soon.
Greg Hunter
Chairman and Chief Executive Officer
Un-audited Consolidated income statement
For the six months ended 30 June 2007
In thousands of pounds sterling Un-audited Un-audited Audited
Six months ended Six months ended 12 months ended
30 June 2007 30 June 2006 31 Dec 2006
Revenue 6,057 - 487
Cost of Sales (5,683) - (270)
Gross Profit 374 - 217
Selling expenses (133) - -
Administrative charges (1,707) (3,016) (5,248)
Administrative expenses (1,280) (1,249) (3,169)
Share based payments (427) (1,767) (2,079)
Fair values adjustments - - 945
Operating loss before financing costs (1,466) (3,016) (4,086)
Financial income 45 66 338
Financial expense (87) - (212)
Loss before tax (1,508) (2,950) (3,960)
Income tax expense - - (9)
Loss for the year (1,508) (2,950) (3,969)
Attributable to:
Equity holders of the parent (1,470) (2,930) (3,938)
Minority interest (38) (20) (31)
Loss for the year (1,508) (2,950) (3,969)
Basic and diluted loss per share (pence) (0.32) (1.44) (1.69)
All activities were in respect of continuing operations
Un-Audited Consolidated balance sheets
For the period ended 30 June 2007
In thousands of pounds sterling
Un-audited Un-audited Audited
As at As at As at
30 June 2007 30 June 2006 31 December 2006
Assets
Property, plant and equipment 21,673 128 17,131
Exploration assets 3,448 436 560
Total non-current assets 25,121 564 17,691
Inventories 2,457 - 2,827
Trade and other receivables 3,225 89 2,330
Cash and cash equivalents 3,652 8,842 5,076
Total current assets 9,334 8,931 10,233
Total assets 34,455 9,495 27,924
Equity
Share capital 471 266 459
Share premium 27,270 10,290 26,389
Other reserves (640) 41 68
Retained earnings (3,259) (1,602) (2,216)
Total equity attributable to equity holders of the 23,842 8,995 24,700
parent
Minority interest 28 67 39
Total equity 23,870 9,062 24,739
Liabilities
Long-term debt 5,026 - -
Provisions 1,352 - 1,389
Deferred taxation 872 - 383
Total non-current liabilities 7,250 - 1,772
Trade and other payables 3,327 433 1,404
Taxation 8 - 9
Total current liabilities 3,335 433 1,413
Total liabilities 10,585 433 3,185
Total equity and liabilities 34,455 9,495 27,924
Statement of cash flows
For the period ended 30 June 2007
In thousands of pounds sterling
Audited
Un-audited Un-audited Twelve months
Six months ended Six months ended ended
30 June 2007 30 June 2006 31 December 2006
Cash flows from operating activities
Loss before tax (1,508) (2,950) (3,960)
Adjusted for:
Financial income (45) (66) (338)
Financial expense 87 - 212
Share based payment 427 1,767 2,079
Depreciation 469 3 97
Impairment - - 25
Fair value adjustment - - (945)
Exchange rate adjustments (136) - (153)
(Decrease) / increase in inventories 356 - (263)
(Increase)/decrease in trade and other (725) (37) (1,774)
receivables
Increase/(decrease) in trade and other payables 1,900 225 1,023
Net cash generated by (utilised in) operating 825 (1,058) (3,997)
activities
Cash flows from investing activities
Interest received 45 66 338
Acquisition of business net of cash (3,152) - (18,385)
Acquisition of exploration assets (2,947) (159) (298)
Acquisition of property, plant and equipment (2,121) (131) (378)
Net cash from investing activities (8,175) (224) (18,723)
Cash flow from financing activities
Increase in long term liabilities 4,980 - -
Increase in minorities 11 - -
Proceeds from the issue of share capital 893 8,930 25,222
Net cash from financing activities 5,884 8,930 25,222
Net increase in cash and cash equivalents (1,466) 7,648 2,502
Cash and cash equivalents at 1 January 5,076 1,194 1,194
Cash acquired (restricted) 81 - 1,390
Effect of exchange rate fluctuations on cash (39) (10)
held
Cash and cash equivalents 3,652 8,842 5,076
Included in cash at 30 June 2007 is restricted cash of #1.38 million, being
funds held to fund the rehabilitation liability in Ghana.
Statement of recognised income and expenses
For the six months ended 30 June 2007
In thousands of pounds sterling Audited
Un-audited Un-audited Twelve months
Six months ended Six months ended ended
30 June 2007 30 June 2006 31 December 2006
Foreign exchange translation differences (240) 41 68
Net income recognised directly in equity (240) 41 68
Loss for the period (1,508) (2,950) (3,969)
Total recognised income and expense for the year (1,748) (2,909) (3,901)
Attributable to:
Equity holders of the parent (1,710) (2,889) (3,870)
Minority interest (38) (20) (31)
(1,748) (2,909) (3,901)
Notes to the Interim Accounts
For the six months ended 30 June 2007
1. Basis of preparation
The financial information contained in this interim report does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The figures relating to the year ended 31 December 2006 have been extracted from
the audited accounts which have been filed with the Registrar of Companies and
received an unqualified audit report which did not contain a statement under
section 237(2) or (3) Companies Act 1985.
The consolidated financial statements incorporate those of Central African Gold
Plc and its subsidiary undertakings for the period. The current and the
comparative half year to June are un-audited and have been prepared using
accounting policies and practices consistent with those adopted in the accounts
for the year ended 31 December 2006.
The financial statements are presented in pounds sterling, rounded to the
nearest thousand. The preparation of financial statements in conformity with
IFRSs requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period of
the revision and future periods if the revision affects both current and future
periods.
Judgements made by management in the application of IFRSs that have significant
effect on the financial statements and estimates with a significant risk of
material adjustment in the next year are in respect of the share-based payments,
and the fair value adjustments, rehabilitation provision and mineral reserves
and resources.
The accounts have been prepared on a going concern basis. As is common with many
mining companies, the company raises money for exploration and capital projects
as and when required.
There can be no assurance that the group's projects will be fully developed in
accordance with current plans or completed on time or to budget. Future work on
the development of these projects, the levels of production and financial
returns arising there from may be adversely affected by factors outside the
control of the group.
In May 2007 the Group completed the raising of a debt facility, which is not in
itself sufficient to enable the Group to fund all aspects of its operations,
exploration and working capital requirements over the next 12 months from the
date of the financial statements. The directors believe that it will be able to
secure the necessary financing through a combination of the issue of new equity
and debt instruments.
However, there is no assurance that the Group will be successful in these
actions. These financial statements do not reflect the adjustments, which could
be material, to the carrying value of assets and liabilities, the reported
revenues, expenses and balance sheet classifications that would be necessary
were the going concern assumption inappropriate.
2. Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the contracted rate or
the rate of exchange ruling at the balance sheet date and the gains or losses on
translation are included in the profit and loss account. Other exchange
differences are dealt with in the profit and loss account.
The assets and liabilities of overseas subsidiary undertakings are translated at
the closing exchange rates. Profit and loss accounts of such undertakings are
consolidated at the average rates of exchange during the year. Gains and losses
arising on these translations are taken to reserves, net of exchange differences
arising on related foreign currency borrowings.
The group has certain operations in Zimbabwe, which is a hyper-inflationary
economy. The group's policy is that the functional currencies of these
subsidiaries is the US dollar. Transactions denominated in Zimbabwean dollars
and other currencies are translated into US dollars at the rate prevailing at
the date of the transaction or the average exchange rate as appropriate.
Monetary assets and liabilities are retranslated into US dollars with the
resulting exchange differences recorded in the profit and loss account.
In translating Zimbabwean dollar transactions into US dollars, the group has
used the Old Mutual implied rate, rather than the official rate, since the Old
Mutual rate gives a more accurate representation of the purchasing power of
Zimbabwean dollars. The assets and liabilities and profit and loss accounts of
overseas undertakings in Zimbabwe are then translated into the reporting
currency as described above.
The Old Mutual rate is calculated by dividing the Old Mutual Plc share price on
the Zimbabwe Stock Exchange by the Old Mutual Plc share price on the London
Stock Exchange. The directors note that, since the official exchange rate is not
freely floating, it does not reflect the impact of the hyper-inflationary
economy on the value of the Zimbabwean dollar.
The group has applied an average of the Old Mutual rate during the year to
transactions denominated in Zimbabwean dollars and recorded in the profit and
loss account. The effective rate is Z$46,214 to US$1. The group has applied a
rate of Z$124,856 to US$1 to the assets and liabilities denominated in
Zimbabwean dollars.
3. Earning per share
Basic and diluted loss per share is calculated by reference to the loss for the
financial period and the weighted average number of shares in issue during the
period of 466,737,727 (June 2006: 204,972,579).
4. Acquisitions
Effective 1 March 2007, CAG acquired 84.7% of Falcon Gold Mines Limited and 100%
Olympus Gold Mines Limited. Further details are contained in the Chairman's
statement.
The value of the net assets acquired are as follows
In thousands of pounds sterling Book value at Revaluation of Estimated fair
acquisition Mineral rights value at time of
acquisition
Property plant and equipment 199 3,101 3,300
Inventory 169 169
Receivables 31 31
Restricted cash 81 81
Payables (387) (387)
Deferred tax (30) (30)
Total net assets acquired 63 3,101 3,164
Satisfied by
Cash 2,285
Shares 868
Minorities 11
3,164
These fair values are based on the preliminary valuation of the underlying
assets and management will update these within twelve months of the acquisition.
5. Subsequent events
Subsequent to the date of these financial statements
a. On 31 July 2007 it issued 2,700,054 new ordinary shares of 0.5p each,
subject to admission to trading on AIM, pursuant to the exercise of options
held by Greg Hunter (Chief Executive) and Mark Rosslee (Chief Financial
Officer), both of whom are directors of the company, and a number of other
senior managers.
b. Implemented a hedge on 7 September 2007 for just over 59,000 ounces of gold
at an average price of US$730 per ounce. This was in terms of the debt
facility with Investec Bank Limited and the hedge is in place for the
period November 2007 to February 2010.
c. Drawn down a further #2 million of the debt facility to fund the capital
expansion of the Bibiani gold mine in Ghana. At the date of these financial
statements #5 million of the total #7.5 million facility had been
drawn down.
6. Reconciliation of Movement in Equity Shareholders' Funds
In thousands of pounds sterling Un-audited Un-audited Audited
Six months ended Six months ended 12 months ended
30 June 2007 30 June 2006 31 December 2006
Loss for Period (1,470) (2,930) (3,938)
Net proceeds from issue of shares 893 8,930 25,222
Effect of currency exchange movements (240) (41) 68
Deferred tax adjustment on acquisitions (468) - -
Share option reserve movement 427 1,767 2,079
Net increase (decrease) in shareholders' (858) 7,726 23,431
funds
Opening Shareholders' Funds 24,700 1,269 1,269
Closing Shareholders' Funds 23,842 8,995 24,700
7. Segmental Information
In thousands of pounds Ghana Zimbabwe
sterling
Un-audited Un-audited Audited Un-audited Un-audited Audited
Six months Six months 12 months Six months Six months 12 months
ended ended ended ended ended ended
30 June 2007 30 June 2006 31 December 30 June 2007 30 June 2006 31 December
2006 2006
Revenue 4,571 - 487 1,486 - -
Profit/(loss) before tax 32 - 980 21 - -
Income tax - - (9) - - -
Profit/(loss for the year 32 - 971 21 - -
Segment assets 27,869 - 22,297 3,994 - -
Segment liabilities (8,536) - (2,902) (885) - -
Total net assets 19,333 - 19,395 3,109 - -
Capital expenditure 3,771 - 26 95 - -
Depreciation 400 - 67 18 - -
In thousands of pounds Mali Botswana
sterling
Un-audited Un-audited Audited Un-audited Un-audited Audited
Six months Six months 12 months Six months Six months 12 months
ended ended ended ended ended ended
30 June 2007 30 June 2006 31 December 30 June 2007 30 June 2006 31 December
2006 2006
Revenue - - - - - -
Profit/(loss) before tax - (84) (222) 11 (34) (55)
Income tax - - - - - -
Profit/(loss for the year - (84) (222) 11 (34) (55)
Segment assets 1,677 154 658 252 319 269
Segment liabilities (268) - (36) (36) (67) (62)
Total net assets 1,409 154 622 216 252 207
Capital expenditure 1,094 130 362 (51) 6 29
Depreciation 13 - 4 - - -
In thousands of South Africa Head Office Group
pounds sterling
Un-audited Un-audited Audited Un-audited Un-audited Audited Un-audited Un-audited Audited
Six months Six months 12 months Six months Six months 12 months Six months Six months 12
ended ended ended ended ended ended ended ended months
30 June 30 June 31 30 June 30 June 31 30 June 30 June ended
2007 2006 December 2007 2006 December 2007 2006 31
2006 2006 December
2006
Revenue - - - - - - 6,057 - 487
Profit/(loss) (630) (252) (1,524) (942) (2,580) (3,139) (1,508) (2,950) (3,960)
before tax
Income tax - - - - - - - - (9)
Profit/(loss for (630) (252) (1,524) (942) (2,580) (3,139) (1,508) (2,950) (3,969)
the year
Segment assets 505 125 314 158 8,897 4,386 34,455 9,495 27,924
Segment (27) (98) (70) (833) (268) (115) (10,585) (433) (3,185)
liabilities
Total net assets 478 28 244 (675) (8,269) (4,271) 23,870 9,062 24,739
Capital 159 119 259 - 35 - 5,068 290 676
expenditure
Depreciation 38 2 26 - - - 469 2 97
8. These interim accounts were approved by the directors on 28 September 2007.
* * ENDS * *
For further information please contact or visit www.centralafricangold.com or
contact:
Central African Gold Plc
Greg Hunter/Nicole Broome Tel: +27 (0) 11 676 2500
London:
St Brides Media & Finance Ltd
Hugo de Salis/Felicity Edwards Tel: +44 (0)20 7242 4477
Strand Partners Limited
Simon Raggett /Braden Saunders Tel: +44 (0)20 7409 3494
RBC Capital Markets
Martin Eales/Andrew Smith Tel: +44 (0) 20 7029 7881
South Africa:
Russell and Associates
Charmane Russell Tel: + 27 11 880 3924
Mob: + 27 82 372 5816
This information is provided by RNS
The company news service from the London Stock Exchange
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