RNS Number : 6281Y
Central African Gold PLC
08 July 2008
Central African Gold Plc / Ticker: CAN / Market: AIM / Sub-sector: Gold Mining
8th July 2008
Central African Gold Plc ("CAG" or the "Company")
Final Results
The board of Central African Gold Plc announces its preliminary results for the year ended 31 December 2007. As trading in the
Company's shares was suspended on 1 July 2008 pending the publication of the financial statements, such suspension will now be lifted with
effect from 8am on 9 July 2008.
Overview
2007
* The Company started the year producing gold from tailings left by the former operator and achieved its objective of re-commencing
underground mining at the Bibiani gold mine ("Bibiani") in Ghana. However, ramping up production at the underground mine has proven to be
more challenging than expected.
* The underground mining project was initiated at Bibiani in November 2007.
* The loss for the period of �14.7 million (2006 �4.0 million) was higher than anticipated, as a result of the significant
investment in the Bibiani mine and on-going exploration programmes and lower than anticipated revenue.
* Gold production for the year was 23,391 ounces ("oz") at CAG's Bibiani as per the trading statement released on 14 November 2007
and 10,246 oz versus an anticipated 15,000 oz from operations in Zimbabwe. The lower production in Ghana resulted from electricity supply
problems, the breakdown of key equipment and lower-than-anticipated tailings grades. The lower than anticipated production in Zimbabwe was a
direct result of the difficult economic circumstances prevailing in the country.
* Group attributable gold reserves increased 142% from 0.876Moz at 31 December 2006 to 2.124Moz at 31 December 2007 (JORC compliant)
and group resources increased 54% from 3.640Moz to 5.604Moz (inclusive of reserves).
* Acquisition of a controlling interest in the Falgold and Olympus gold mines in Zimbabwe for �3.4 million in a cash and shares
deal.
* Maiden resource of 500,000 oz declared at the Medinandi property in Mali.
2008
* Production for the year to May 2008 at Bibiani has been approximately 11,565 oz versus a targeted 32,377 oz.
* Despite good cost controls and a disciplined approach with respect to capital expenditure, the net result has been an estimated
loss to May 2008 of approximately US$400,000, principally due to lower than anticipated revenues.
* The slower than anticipated production build-up at Bibiani has been predominantly due to the under-performance of the second hand
fleet of load and haulage equipment purchased when commissioning the mine and lower-than-planned mined grades (averaging around 2.2g/t in
the first half of 2008) due to a lack of mining flexibility.
* New trucks have been purchased and they are expected to all be on site by mid-July. The first new truck has already made a
difference to mining operations. New loaders are on order and are anticipated to be on site by September 2008.
* A letter of intent has been signed with an affiliate of Barminco for sinking of second decline to access orebody and achieve
ramp-up to initial 100,000 tonnes per month ("tpm") target more quickly than CAG could achieve on its own. Mobilisation is complete and
sinking began in June 2008.
* The Company has also identified a number of surface resources on the Bibiani property which have the potential to be accessed
quickly and generate additional ounces of production.
Funding
Cash resources at the date of reporting are severely limited as a result of the Bibiani mine not achieving its short term production
objectives while continuing its investment programme. The Directors have identified a need for the Company to raise capital to support
operations. Immediate support of approximately US$8 million has been committed by two shareholders in the form of US$7 million in
convertible notes with a 6-month term and the issue of US$1m of ordinary shares. An additional US$10 million will need to be raised via an
equity placing in August 2008 and the necessary shareholder approvals will be sought at the upcoming annual general meeting ("AGM") for the
share offer and the loan note conversion. The proceeds of the notes and equity issues will be used to fund the proposed surface mining
programme at Bibiani, the completion of the new decline and working capital needs.
If this capital raise does not take place, either due to non-ratification by shareholders or incomplete take up of the offering, the
Company will need to seek alternative funding immediately after the AGM. On the basis of this cash flow information, and the Board's capital
raising assumptions, the Directors consider that the Company will be able to continue in operational existence for the foreseeable future by
meeting its liabilities as they fall due. The financial statements are therefore prepared on a going concern basis.
Summary
CAG's objective of becoming a mid-tier gold producer with a world class portfolio of exploration projects was advanced during 2007. The
foundations of CAG were laid with the purchase of the Bibiani Mine in Ghana in late 2006 followed by a year of construction in 2007.
Looking forward, 2008 will be a period of consolidation as production gradually increases to take advantage of the rising global demand for
gold.
During the period under review CAG substantially increased both its ore reserve and mineral resource base at its flagship asset Bibiani.
The Company has also continued exploration activities at its permits in western and southern Mali, where CAG has already quantified a
resource of 500,000 oz gold. CAG has broadened its geographical focus via the acquisition of two companies in Zimbabwe with production and
exploration assets, although the continuing difficult situation in Zimbabwe limits the short term contribution from operations in that
country. To ensure that CAG maximises the inherent value of its assets, it has strengthened the management team and Board which it believes
has the ability to create a leading African gold mining company.
Ghana - Bibiani
The exploration and resource development programme at Bibiani is progressing well and the team remains excited about the region, the ore
body and the mine. Since acquiring Bibiani at the end of 2006, CAG has implemented an aggressive exploration programme to increase both
quantity and quality of the mineral resources and deliver the kind of targets one would expect of a project located within the highly
prospective Sefwi-Bibiani belt, which is known to host over 17 million oz of gold mineral resources. In July 2007 the Company announced a
288% increase in Bibiani's underground mineral resource estimate to 2.68 million oz of gold and a threefold increase in its total global
mineral resources to 3.23 million oz.
The total global underground mineral resource estimate is now in excess of 3.0 million oz of gold grading 2.47 g/t. In addition, in
March 2008, CAG announced a 31% increase in its underground ore reserve estimate to 1.38Moz gold (Sept 2007: 1.05Moz gold: 391%). These
estimates provide a strong basis for the sustainable mineral resource to ore reserve conversion, and underpin the potential for the
development of a viable underground mining operation with a plus ten year life.
During the year production was lower than anticipated, mainly due to erratic power supply, the breakdown of key equipment that took
longer than anticipated to replace or repair as result of parts shortages affecting the industry and Ghana in particular, coupled with
lower-than-anticipated tailings grade. Production was further impacted by restricted tailings face heights in certain areas. Standby power
generating capacity has subsequently been purchased that will allow the mine to run key underground production and process functions.
The production build up at the Bibiani in 2008 has been much slower than expected, due predominantly to the non-performance of the
second hand fleet of load and haul equipment acquired upon purchase of the mine. Management on the ground has had to deal with numerous
equipment problems that have disrupted production. To address this issue, three new haul trucks have been procured. One is on site and
performing well and the others have been acquired. An order has been placed for two new Caterpillar 1700G loaders (delivery due September
2008).
The lack of the ability to load and haul effectively has led to the development schedule lagging and as a result access to higher grade
stoping areas has been impacted. This situation has begun to ease and higher grade areas are now being mined in line with or above reserve
grade.
The lower than anticipated grades, problems with the molecular sieve material of the oxygen plant and an electrical problem with the
ball mill motor have impacted on plant recoveries during the latter part of 2007 and into 2008, with recoveries running in the low to mid
70% range rather than around 82%. The oxygen plant has now been revamped and the ball mill repaired. In addition other innovations to
improve plant performance and recovery have been installed. These include the upgrade and revamp of the oxygen plant, the installation of
an oxygen shear reactor, installation of a flash float cell and regrind mill and re-commissioning of the Knelson concentrator. Plant
performance and recovery has started to respond.
In order to ensure that the existing equipment is not over-extended, the Company agreed in May 2008 for a west African affiliate of the
specialist mining contractor, Barminco, for the sinking of a new decline. Barminco provides the plant, the people and expertise for hard
rock underground mining operations throughout Australia and through African Underground Mining Services in West Africa and has experience
with all mining methods from narrow vein small deposits to large scale sub-level cave operations using the latest mechanised mining
equipment.
CAG completed the portal and initial development for the decline in early 2008, which is located at Bibiani's Strauss pit (next to the
run-of-mine pad at the plant). The contract will be for a 2,000m by 5.5m x 5.5m decline that will link the portal and ultimately 14L of the
underground mine (approximately 500m below surface). Once the decline has been completed the mine will have two fully serviced declines
that will result in an installed capacity of over 100,000 tpm of ore. This will enable us to access and extract ore more efficiently and
provide greater security of supply. The increased throughput should also enhance recovery rates at the processing plant. The final
installation of the conveyor (anticipated in Q4 2009) will result in an ore haulage capacity of 200,000 tpm.
The Directors believe that the existing ore reserve and mineral resource base, when combined with the completion of the decline and
conveyer, a revised load and haul schedule, and the potential to commence opencast operations, will result in increased production during
2009. This ramp up is currently the subject of an optimisation exercise being undertaken by leading global mining consultants SRK.
SRK has also been mandated to carry out a review of the underground operation, mine plans, schedules and processes relating to the ramp
to the 100,000 tpm target. Its initial review has not revealed any fatal flaws. The full report is due to be released to the Board
shortly.
Surface mining opportunities totalling some 3.35 million tonnes at an average grade of 1.86 g/t containing 201,000 oz Au have been
identified on management estimates. The Directors believe that these opportunities present a potentially economically viable additional
source of ore at Bibiani. The final pit designs and optimisations are being conducted by a leading independent mining consultant in
Australia. Mining is anticipated to commence in the fourth quarter of 2008. Negotiations with a local mining contractor with immediate
available capacity are also well advanced, so the work can be carried out without diverting the Bibiani work force from the task of getting
the underground operations right.
CAG continues to operate in line with recognised world class standards in safety, health and the environment and is working toward the
attainment of OSHAS 18001 certification and Ghana Environmental Protection Agency ("EPA") certification.
The Directors and management are focussed to continue increasing the mineral resource base, production levels, and to reduce costs. In
the balance of the 2008 financial year, shareholders may anticipate:
* The ramp up towards an annualised 100,000 oz production.
* Continued effective management of our surface and underground exploration efforts - increasing the ore reserve, mineral resource
base and the conversion of mineral resources to ore reserves.
* Effective management of costs - being highly cognisant of the cost pressures that developing a mine presents. A number of
initiatives have and will be introduced to measure and control costs, ensuring optimal extraction of ore reserves.
* Optimisation of plant availability and metallurgical recoveries.
* Continued care and concern for the country and community; CAG is committed to being a good corporate citizen in Ghana.
Zimbabwe - Falgold and Olympus
During the year, the Company concluded the acquisition of an 84.7% stake in Falcon Gold Zimbabwe Limited ("Falgold"), a public
Zimbabwean company, and 100% of the issued share capital of Olympus Gold Mines Limited, for a consideration of circa �3.4 million cash and
shares. Both Falgold and Olympus are producing entities with extensive claim holdings in Zimbabwe. Two of the Company's Zimbabwean assets,
Camperdown and Dalny have significant pedigree and potential in terms of large opencast targets. Zimbabwe has a known history of gold
production and good infrastructure and thus has solid gold producing potential when compared with other countries in Africa.
The management of CAG remain positive about the longer term prospects for doing business in Zimbabwe and note that a number of gold and
platinum producers are continuing their operations. Zimbabwe is resource-rich and relatively under-exploited. Accordingly the Directors
believe that CAG has an attractive foothold and it is CAG's intention to fast-track exploration and development programmes on these
properties when conditions allow for further investment.
It is important to pass comment on the Indigenisation and Economic Empowerment Bill ratified by parliament in March this year, as the
new law obliges foreign-owned companies to sell 51% of their Zimbabwean business to black Zimbabweans. The situation as to how this bill
will affect the Zimbabwean mining industry is still unclear, however, there is active and encouraging dialogue taking place between the mine
owners and state bodies. The Company will update shareholders of developments in due course. Given the current economic situation in
Zimbabwe the Directors have to apply considerable judgement in assessing the recoverable amount of goodwill and other assets in Zimbabwe. At
this stage the Directors do not believe that there has been an impairment of the overall asset value.
Production at the Zimbabwean operations has been erratic through 2007, which saw a refocusing and restructuring of the reporting lines
and the leadership of the Company and its operations after CAG acquired control. The local companies have entered 2008 in better shape
structurally and with strategies in place to steer them through potential outcomes facing Zimbabwe. The continued operation of the mines is
dependent on the ability to secure timely receipt of revenues outstanding from the Reserve Bank of Zimbabwe, and a regular review of the
support price of gold. Obtaining necessary spare parts and supplies has also been challenging for the companies, as well as for other
companies operating in the country, as a result of the difficult economic situation. Notwithstanding the difficulties, CAG, the Board of
Falgold and management are positive that the current initiatives to refurbish and modernise production processes will ensure that the
Zimbabwean assets remain viable in the short term and put them on a path to realise the substantial potential that exists in the portfolio of mining and exploration assets within the Group. In addition,
the international gold price is expected to remain firm and will increase the possibility of accessing other marginal ore bodies.
Mali
CAG's highly prospective portfolio of 17 properties spanning approximately 2,600 sq km of Birimian strata in west and south Mali
continues to generate encouraging results.
During 2007 work programmes were completed on all Mali Goldfield licences, with 13,500 assays completed and 18 follow-up targets
identified, of which six clustered and structurally-controlled gold anomalies are being prioritised. Most notably, in the Yanfolila
district, CAG has identified a number of 2km to 7km long clustered gold-in-soil anomalies with values over 100 parts per billion gold.
The most advanced project is the 150 sq km Medinandi and Bokolobi permits (Songhoi Ressources SA) in the prospective Kenieba district.
Last season a mineral resource of approximately 500,000 oz of gold grading 4.55g/t Au at the Fadougou Main Zone target was defined, as well
as the discovery of a new gold mineralisation zone (Medinandi prospect). There are five additional targets on the property, with further
targets emerging from a combined ground high resolution Induced Polarisation ("IP") survey and an airborne survey using a geophysical system
known as Versatile Time-Domain Electro Magnetics ("VTEM") survey.
The new exploration season is now underway and continued success with another phase of reverse circulation drilling is expected.
Botswana - consolidating exploration
During the year CAG increased its interest in Matoko Limted, which owns the 430 sq km Kraaipan prospecting licence in Botswana, to 100%
at a cost of US$250,000. The licence spans the highly prospective Achaean Kraaipan greenstone belt. CAG is currently implementing an initial
exploration programme entailing structural mapping combined with the integration of enhanced Aster imagery with the existing data-sets.
Follow-up targets will be reviewed and re-prioritised. CAG believes the licence area is prospective for gold and provides excellent
exploration potential.
Gold - the run continues
The gold price rose steadily through 2007, from US$750 per oz to almost US$900 per oz at year-end. This rise has continued into the
start of 2008, as a weak dollar, record oil prices, the sub-prime crisis and the associated fears around a US recession have combined to
push the gold price over the record US$1,000 per oz mark in early March 2008. Investor appetite for gold continues to hold and consensus
indicates a solid year ahead. The gold price is currently in a range of between US$870 per oz and US$940 per oz driven primarily by ongoing
concerns relating to global inflation and the energy crisis. This appears to be an ideal time to be bringing ounces to the market and CAG
intends to take full advantage of the current demand as it ramps up production.
Board and Management
CAG has recently strengthened its board and management team as part of its strategy of assembling a board with the relevant experience
and contacts to advance the existing gold production and exploration assets. Roy Lander has joined the Board as Chairman, David Glennie and
Tom Gibian as Non-Executive Directors and Navaid Burney, alternate Non-Executive Director. Together they have solid understandings of the
financial markets and possess strong relationships within the African resource sector, which will help CAG as it looks to acquire further
assets and strengthen the Company's portfolio of gold assets across Africa.
An announcement was recently made in respect of the resignation of the CFO. The Board continues to seek a suitable candidate for the
role.
Financial Review
During the period to 31 December 2007 turnover was �11.0 million from the sale of a total of 33,637 oz.
Administrative expenses were �9.6 million (2006: �5.2 million) and the total loss for the period was �14.7 million (2006: �4.0 million)
or a loss of 15.31p per share (2006: 8.46p). The poor operating result has in the main been the result of lower than budget production from
tailings operations and a slower than expected build up of production from underground at Bibiani.
Results for 2007 reflect the "fair value of the gold agreement" of �3.8 million (US$7.5 million) applying a gold price of US$833.20/oz
at 31 December 2007. This is as the result of the gold sale agreement which was required as part of the US$25 million loan facility taken
out with Investec in 2007. At 30 June 2008 the gold sale agreement reflected a mark to market loss of �6.9m (US$13.8 million) applying a
gold price at the time of US$924/oz. The results also reflect a share based payment charge of �2.2million (2006: �2.1million).
The Zimbabwe financial results have a functional currency of US dollars. In translating any Zimbabwean Dollar transactions in those
results, the Old Mutual Implied Rate has been utilised. The Old Mutual Implied Rate has been used rather than the official rate, since the
Group believes that the Old Mutual Implied Rate gives a more accurate representation of the purchasing power of the Zimbabwean dollar.
In November 2007, the Company secured an extension of US$10 million to the existing debt facility of US$15 million to fund development
of production and exploration projects in 2008. This has been fully drawn. In January 2008, a capital raise of �15.6 million was completed
through the issue of 60 million new ordinary shares.
The much slower than anticipated build-up in production has placed considerable pressure on the cash resources of the group during 2008.
The negative impact on revenue has to some extent been mitigated by a solid absolute cost performance and optimisation of capital and
exploration programmes. It is also anticipated that the purchase of the new mining fleet, previously mentioned, will have a marked positive
impact on output and revenues for the balance of 2008 and into 2009.
The financial statements are prepared on a going concern basis which the Directors believe to be appropriate for the following reasons:
* Management has prepared projected cash flow information for the period ending twelve months from the date of the Board's approval
of the financial statements.
* Cash resources at the date of reporting are severely limited as a result in the main due to Bibiani not achieving its short term
production objectives and the Directors have identified a need for the Company to raise capital to support operations.
* Immediate support of approximately US$8m has been committed by two shareholders by way of up to US$7 million in convertible notes
with a 6-month term and the issue of US$1 million of new ordinary shares. The Company will seek to raise an additional US$10 million via an
equity placing in the third quarter of 2008. The necessary shareholder approvals will be sought at the upcoming AGM for the share offer and
the loan note conversion. The proceeds of the notes and equity issues will be used to fund the proposed surface mining programme at Bibiani,
the completion of the new decline and working capital needs.
* At Central African Gold Ghana Ltd negotiations for an overdraft facility (US$1 million) and lease finance for mine equipment
(US$3.5 million) are at an advanced stage which will further support group finding.
If this capital raise does not take place, either due to non-ratification by shareholders or incomplete take up of the offering, the
Company will need to seek alternative funding immediately after the AGM. On the basis of this cash flow information, and the Board's
capital raising assumptions, the Directors consider that the Company will be able to continue in operational existence for the foreseeable
future by meeting its liabilities as they fall due.
However, there can be no certainty in relation to these matters, which may cast significant doubt on the Company's ability to continue
as a going concern. The Company may, therefore, be unable to continue realising its assets and discharging its liabilities in the normal
course of business but the financial statements do not include any adjustments that might result from this basis of preparation being
appropriate. If this basis was appropriate there may be significant write down of assets within the financial statements and long term loan
agreements may become immediately recallable.
Annual report
The Company's financial statements will be sent to shareholders on 8 July 2008. Additional copies will be made available to the public,
free of charge, from the Company's investor relations representatives at St Brides Media and Finance Ltd, 38 Bow Lane, London EC4M9AY.
The financial statements may be downloaded from CAG's website at www.centralafricangold.com from 8 July 2008. A full version of the
annual report and notification of AGM will be posted in due course.
Consolidated income statement
For the year ended 31 December 2007
2007 2006
In thousands of pounds sterling Total Total
Revenue 10 965 487
Cost of sales (11 945) (270)
Gross (loss)/profit (980) 217
Other operating income 41 -
Administrative charges (9 647) (5 248)
Other administrative expenses (7 455) (3 169)
Share-based payments (2 192) (2 079)
Negative goodwill - 945
Operating loss before financing costs (10 586) (4 086)
Financial income 306 338
Financial expenses (4 495) (212)
Other financial expenses (662) (212)
Gold sale agreement fair valuation (3 833) -
Loss before tax (14 775) (3 960)
Taxation 38 (9)
Loss for the year (14 737) (3 969)
Attributable to:
Equity holders of the parent (14 732) (3 938)
Minority interest (5) (31)
Loss for the year (14 737) (3 969)
Basic and diluted loss per share (pence) (15.31p) (8.46p)
Consolidated statement of recognised income and expense
For the year ended 31 December 2007
Group
2007 2006
In thousands of pounds sterling Total Total
Foreign exchange translation differences (284) 68
Income and expense recognised directly in equity (284) 68
Loss for the year (14 737) (3 969)
Total recognised income and expense for the year (15 021) (3 901)
Attributable to:
Equity holders of the parent (15 016) (3 870)
Minority interest (5) (31)
Total recognised income and expense for the year (15 021) (3 901)
Consolidated balance sheet
As at 31 December 2007
Group
2007 2006
In thousands of pounds sterling Total Total
Assets
Goodwill 501 -
Property, plant and equipment 31 582 18 520
Exploration assets 1 957 560
Total non-current assets 34 040 19 080
Inventories 2 957 2 827
Trade and other receivables 580 2 330
Cash and cash equivalents 2 821 5 076
Total current assets 6 358 10 233
Total assets 40 398 29 313
Equity
Share capital 530 459
Share premium 28 352 26 389
Foreign currency translation reserve (221) 68
Accumulated loss (14 756) (2 216)
Total equity attributable to equity holders of the 13 905 24 700
parent
Minority interest - 39
Total equity 13 905 24 739
Liabilities
Loans and borrowings 9 701 -
Other financial liabilities 2 654 -
Deferred taxation 855 383
Provisions 3 253 2 778
Total non-current liabilities 16 463 3 161
Loans and borrowings - current portion 3 143 -
Other financial liabilities - current portion 1 179 -
Trade and other payables 5 694 1 404
Taxation 14 9
Total current liabilities 10 030 1 413
Total liabilities 26 493 4 574
Total equity and liabilities 40 398 29 313
Consolidated statement of cash flows
For the year ended 31 December 2007
Group
2007 2006
In thousands of pounds sterling Total Total
Cash flows from operating activities
Loss before tax (14 775) (3 960)
Adjusted for:
Financial income (306) (338)
Financial expense (including gold sale agreement) 4 495 212
Share-based payments 2 192 2 079
Depreciation 1 263 97
Loss on disposal of property, plant and equipment 17 -
Impairment loss on exploration assets 300 25
Negative goodwill - (945)
Exchange rate adjustments (5) (153)
Decrease/(increase) in inventories 39 (263)
Decrease/(increase) in trade and other receivables 1 781 (1 774)
Increase in trade & other payables and provisions 4 331 1 023
Net cash from operating activities (668) (3 997)
Cash flows from investing activities
Interest received 29 338
Interest expense (245) -
Acquisition of business net of cash (2 330) (18 385)
Acquisition of exploration assets (1 657) (298)
Acquisition of property, plant and equipment (10 806) (378)
Investments in subsidiaries
Net cash from investing activities (15 009) (18 723)
Cash flows from financing activities
Proceeds from the issue of share capital 932 25 222
Loan and borrowing received 12 517 -
Net cash from financing activities 13 449 25 222
Net increase in cash and cash equivalents (2 228) 2 502
Cash and cash equivalents at 1 January 5 076 1 194
Cash acquired (restricted) - 1 390
Effect of exchange rate fluctuations on cash held (27) (10)
Cash and cash equivalents at 31 December 2 821 5 076
Restricted cash included in cash and cash equivalents
at 2 332 1 389
31 December
Status of this financial information
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2007 or
2006. Statutory accounts for 2006 have been delivered to the registrar of companies, and those for 2007 will be delivered in due course. The
auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985. The report for 2006 did not include a reference to any matters to which the auditors drew attention for emphasis without
qualifying their report. The audit report for the year ended 31 December 2007 drew attention by way of emphasis without qualification to the
basis of preparation.
That basis of preparation is reproduced below:
Basis of preparation
The financial statements for the year ended 31/12/07, from which the financial information in this preliminary announcement has been
extracted have been prepared on the going concern basis, notwithstanding net current liabilities of �3.7 million, which the directors
believe to be appropriate for the following reasons. The Directors have performed a detailed review of current trading which has included
consideration of the Company's funding position as at the date of approval of these financial statements and the projected funding
requirement covering the next 12 months. In considering the projected funding requirement, the Directors have used a price for gold of
US$900 /oz.
Background
In the period since the Company's year end, the development of the Company's mine at Bibiani has continued to lag behind its planned
schedule with a consequential shortfall in gold production compared with budget. This in conjunction with ongoing capital expenditure has
utilised cash resource and resulted in an accumulation of trade payables.
As a result the Company now has an immediate requirement for funding to provide it with the cash resource necessary to settle the
accumulated trade payables and fund operational expenses and mine optimisation of the existing shaft over the period until production
reaches a satisfactory level and generates net positive cash flows, which is expected in August 2008.
The Company's viability is dependent on achieving acceptable performance levels from the existing decline shaft and a second decline
shaft at Bibiani. The second decline shaft is scheduled to be operational in January 2009.
Operating improvements at Bibiani
The Directors have taken the following steps to improve immediate production at Bibiani:-
* 3 new trucks have been purchased to increase the fleet to 9 and these are expected to be on site at Bibiani during July 2008. The
first new truck has already improved the overall efficiency of the mining operations.
* 2 new loaders are on order and are anticipated to be on site by September 2008 bringing total fleet size to 7.
* A letter of intent has been signed with Barminco to develop the second decline shaft and work is currently underway to have this
operational by January 2009.
* In support of its development work at Bibiani, the Company has also received independent reports from Ukwazi and Snowden which
confirms the Directors' view of the reserves and resources respectively at the mine and their commercial recoverability.
* An independent report from SRK Consulting has been commissioned. Its initial review has not revealed any fatal flaws. The full
report is due to be released to the Board shortly.
Immediate working capital requirements
The Directors have prepared projected cash flow information for the period ending 12 months from the date of their approval of these
financial statements. Those forecasts include assumptions concerning the success and timing of the improved performance levels of the
existing shaft and the completion of the second shaft. On the basis of this cash flow information the Company requires further funding of
US$22.5 million in order to satisfy its immediate working capital requirements and continue the development of the Bibiani site. This is
expected to be raised in the form of equity financing of US$18 million (including US$7 million of convertible loans) and debt financing of
US$4.5 million.
The Company is therefore seeking to raise additional funding in the following forms to ensure that it can meet its forecast cash
requirements:
* The Company has arranged with Investec Asset Management and Emerging Capital Partners an immediate raising of US$8 million in the
form of convertible loan notes (US$7 million) and new ordinary shares (US$1 million). The Company has signed legally binding agreements with
these investors and funds will be made available by 12 July 2008. Subject to shareholder vote (see below) the company will immediately
convert those notes to equity shares.
* The Company is planning to issue further shares of US$10 million, in August 2008.
* The Company is in the process of arranging an overdraft facility with the Bank of Ghana for US$1 million and lease finance for
equipment at Bibiani of US$3.5 million. However, these arrangements have not been finalised at the date of these financial statements. The
directors have no reason at this stage to believe these arrangements will not be forthcoming.
The conversion terms of the convertible loans and the intended placing of ordinary shares will both need to be approved by shareholders
at the Company's forthcoming Annual General Meeting. The directors have held informal discussions with a number of the Company's
shareholders and, in light of the value of the Company's gold reserves and the independent confirmation that those reserves can be
successfully recovered, are confident of the continuing support of shareholders for these resolutions and therefore the continued funding of
the business.
In the event that the necessary resolution regarding the convertible loan notes is not received those notes will be repayable in cash by
31 December 2008. Furthermore, should the resolution to approve the share issue not be passed then the Company will be obliged to seek
alternative sources of finance immediately following the Annual General Meeting.
The directors also note that due to the delay in publication of the 2007 annual report the company was not in compliance with the
covenants governing the existing borrowings provided by Investec Bank Limited described in note 18. The covenant in question required the
annual report to be delivered within 90 days of the balance sheet date. In light of discussions with Investec Bank, the directors have no
reason to believe that the covenant breach will not be waived upon publication of this annual report.
Conclusion
The Directors have reviewed the Company's cash projections for the next 12 months, the planned performance improvements at Bibiani and
the funding plans described above, and have concluded that together they provide an appropriate basis for the Directors to present the
financial statements of the Company on a going concern basis.
However, there can be no certainty in relation to these matters, which casts significant doubt on the Company's ability to continue as a
going concern. The Company may, therefore, be unable to continue realising its assets and discharging its liabilities in the normal course
of business but the financial statements do not include any adjustments that might result from the basis of preparation being
inappropriate.
For further information please visit www.centralafricangold.com or contact:
Greg Hunter/ Central African Gold Plc Tel: +27(0)11 676 2500
Nicole Broome
Hugo de Salis/ St Brides Media and Finance Ltd Tel: +44(0)20 7236 1177
Felicity Edwards
Simon Raggett Strand Partners Limited Tel: +44(0)20 7409 3494
Charmane Russell Russell and Associates Tel: +27(0)11 880 3924
Notes to Editors:
Central African Gold Plc, admitted to AIM in April 2004, was established to acquire gold assets with a geographical focus on Africa. The
Company has established a sound portfolio with projects in Ghana, Mali, Zimbabwe and Botswana. It has a highly experienced management team,
which has worked together for four years managing six underground greenstone gold mining operations and building exploration portfolios.
CAG's portfolio includes the developing Bibiani gold mine and two prospecting licences in Ghana, which it acquired from AngloGold
Ashanti Limited, three joint ventures in Mali covering 17 prospective permits and a licence in Botswana covering the extension of the
Kraaipan greenstone belt from South Africa. During 2007 CAG acquired 5 gold mines and extensive exploration properties in Zimbabwe. The
management team is evaluating additional prospects in Africa to establish CAG as a leading mid-tier African gold producer with world class
exploration and production assets.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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