CAN Central A.G.

 

TIDMCAN 
 
RNS Number : 4486E 
Central African Gold PLC 
21 December 2009 
 

Central African Gold Plc / Ticker: CAN / Market: AIM / Sub-sector: Gold Mining 
21 December 2009 
Central African Gold Plc ('CAG' or 'the Company') 
Corporate Update 
 
 
The Board of directors of Central African Gold Plc, the AIM quoted gold mining 
and exploration company, ('the Board') is pleased to provide a corporate update 
on recent developments including, inter alia, the disposal of its Malian assets, 
an extension to its existing convertible loan notes and the issue of new 
convertible loan notes and the expected release of its financial results. 
 
 
Highlights 
  *  Agreement to dispose of CAG's Malian assets to Colonial Resources Limited 
  ('Colonial Resources') for a total consideration of up to US$5.0m 
  *  Extension of the repayment deadline applicable to the Convertible Loan 
  Agreements (as defined in the circular to shareholders dated 27 March 2009) to 
  29 April 2011 
  *  New convertible loan notes issued, raising US$1.25 million (approximately 
  GBP774,469) 
  *  Financial results to be published on or before 25 December 2009 
  *  General Meeting and Annual General Meeting ('AGM') to be convened shortly 
 
 
 
CAG's acting Chairman and CEO Roy Pitchford said, "As all shareholders will be 
aware, 2009 has been particularly challenging for the Company. The Board has 
worked hard to ensure that the business has adequate funding in order to 
continue to operate its Zimbabwean gold mining operations and the Board believes 
that today's news represents a significant step forward in securing this 
objective. 
 
 
"The funds raised by the sale of CAG's Malian assets, together with the new 
funds injected into the business by Investec Asset Management, Emerging Capital 
Partners and HBD Zim Investments, and the deferral of our obligations under the 
existing convertible loan agreements gives the Company the opportunity to 
develop its remaining assets and generate shareholder value. 
 
 
"The Board would also like to take this opportunity to reiterate its contrition 
to all of the Company's stakeholders following the accounting difficulties that 
have so significantly delayed the release of the 2008 annual results and the 
2009 interim results (together 'the Financial Reports') and undertakes to do all 
in its power to prevent such a situation occurring again. Nevertheless, whilst 
it remains the Board's belief that both sets of results will be announced 
shortly, the Board notes that should the Company not publish its Financial 
Reports by 25 December 2009, it may be mandatorily delisted pursuant to Rule 41 
of the AIM Rules." 
 
 
Malian Assets Disposal 
 
 
The Company has today entered into a binding agreement to dispose of (i) its 80 
per cent. equity interest in Mali Goldfields SARL, together with all net claims 
on loan account of the Company or any of its subsidiaries against Mali 
Goldfields SARL and (ii) its 80 per cent equity interest in Songhoï Resources 
SARL together with all net claims on loan account of the Company or any of its 
subsidiaries against Songhoï Resources SARL (together 'the Malian Assets') ('the 
Disposal') to Colonial Resources ('the Agreement') for a total consideration of 
up to US$5.0 million ('the Consideration'). As at 31 December 2008, the Malian 
Assets, which are early stage gold exploration assets, consisting, at 30 
November 2009, of 18 prospective permits spanning circa 1,883km² located within 
the Kedougou-Kenieba window, a major Lower Proterozoic Birimian outlier on the 
north east margin of the West African Shield, were recorded as having a book 
value of GBP4.4 million, as at the year ended 31 December 2008, and profits of 
GBP749,000, for the year ended 31 December 2008 (of which most is attributable 
to gains on foreign exchange transactions). 
 
 
The Consideration is made up of an initial non-refundable payment of US$0.6 
million in cash, which is to be paid within 2 business days of the signing of 
the Agreement; a further US$3.4 million payable in cash to the Company on 
completion of the Disposal ('Completion') ('the Completion Payment'); and a 
further US$1.0 million contingent payment, which will only be payable to the 
Company in cash upon the achievement of a JORC compliant Indicated or Measured 
Resource of collectively at least 500,000 ounces gold in respect of the areas 
covered by the licences granted to each of Songhoï Resources SARL and Mali 
Goldfields SARL ('the JORC Payment'). 
 
Completion must occur on or before 3 March 2010 and is subject to, inter alia, 
CAG and Colonial Resources shareholder approval, and the completion of a capital 
raising by Colonial Resources to raise sufficient funds to satisfy the 
Completion Payment and the JORC Payment (if payable) and to seek shareholder 
approval for the necessary issue of equity. A Circular containing notice of the 
General Meeting to approve, inter alia the Disposal and associated matters, will 
be sent to CAG shareholders shortly. 
 
 
CAG will use the Consideration, as it is received, to satisfy its general 
working capital requirements, to meet certain creditor balances that will fall 
due on Completion and to develop its Zimbabwean gold assets. 
 
 
Convertible Loan Agreements 
 
 
Investec Asset Management (Pty) Limited ('IAM') and ECP have agreed to extend 
the terms of the loans made available to the Company, as described in the 
circular sent to shareholders on 27 March 2009, amounting to US$2.2 million and 
US$1.8 million respectively. These loans now have a new maturity date of 29 
April 2011 (extended from the earlier date of 14 April 2010 or within five days 
of the receipt of funds by the Company from the sale of its entire shareholding 
in Mali Goldfields SARL and Songhoï Resources SARL). 
 
 
Additionally, CAG has entered into new Convertible Loan Agreements ('the New ECP 
and IAM Convertible Loan Agreements') with ECP and IAM, (together, 'the 
Lenders') and a new Convertible Loan Agreement (the 'New HBD Loan Agreement') 
with HBD Zim Investments Limited ('HBD'). The New ECP and IAM Convertible Loan 
Agreements and the New HBD Loan Agreement together total circa US$1.25 million 
(approximately GBP774,469) and amount to US$397,267 from HBD (approximately 
GBP246,168), US$705,070 from ECP (approximately GBP436,900) and US$147,662 from 
IAM (approximately GBP91,499). All loan amounts used the rate of exchange 
prevailing on the date of the New ECP and IAM Convertible Loan Agreement or the 
New HBD Loan Agreement, as relevant. The funds received by the Company under the 
New ECP and IAM Convertible Loan Agreements and the New HBD Loan Agreement incur 
interest at 10 per cent. per annum, compounded monthly in arrears with the full 
amount payable on the maturity date, 29 April 2011. There is no penalty for 
early repayment of the New ECP and IAM Convertible Loan Agreement or the New HBD 
Loan Agreement. 
 
 
The terms of the New ECP and IAM Convertible Loan Agreements provide that the 
Lenders have the right to convert all or part only, of the loans at the 
conversion price of the lesser of 0.9 pence per ordinary share and ten per cent. 
below the USD equivalent of any price at which the Company issues shares while 
monies are still payable to the relevant Lender under the terms of the New 
Convertible Loan Agreement.  Under the terms of the New ECP and IAM Convertible 
Loan Agreements each of the Lenders acknowledge that the Company currently does 
not have the capacity to issue the full number of shares issuable should they 
wish to convert the loans and that, should the Company not receive the required 
shareholders approval needed to create and issue all of the shares issuable on 
conversion, the Lenders shall only be able to exercise their conversion rights 
to the extent that the Company has the relevant authorities to issue and allot 
such shares at that time. 
 
 
The terms of the New HBD Loan Agreement provide that HBD has the right to 
convert all, and not part only, of the loans at the conversion price of 0.9 
pence per ordinary share.  Under the terms of the New HBD Loan Agreement, HBD 
acknowledges that the Company currently does not have the capacity to issue the 
full number of shares issuable should HBD wish to convert the loans and that, 
should the Company not receive the required shareholders approval needed to 
create and issue all of the shares issuable on conversion, HBD shall only be 
able to exercise its conversion rights to the extent that the Company has the 
relevant authorities to issue and allot such shares at that time. 
 
 
As IAM, ECP and HBD are substantial shareholders in the Company, the New ECP and 
IAM Convertible Loan Agreements and the New HBD Loan Agreement are classified as 
related party transactions in accordance with the AIM Rules. Accordingly, the 
independent directors, being Roy Pitchford and Craig Campbell, having consulted 
with Strand Hanson Limited, the Company's nominated adviser, consider the terms 
of the New ECP and IAM Convertible Loan Agreements and the New HBD Loan 
Agreement to be fair and reasonable insofar as the Company's Shareholders are 
concerned. In providing its advice, Strand Hanson Limited has taken into account 
the independent directors' commercial assessments. 
 
 
Financial Reports and AGM 
 
 
The Company is continuing to work with its auditor, KPMG Audit Plc, to 
finalise the Company's annual report and accounts for the year ended 31 December 
2008 and the Interim Results for the six months ended 30 June 2009 and expect 
these will be published before 25 December 2009, the deadline set by AIM Rule 
19. The Board notes that should the Company not publish its Financial Reports by 
25 December 2009, it may be mandatorily delisted pursuant to Rule 41 of the AIM 
Rules. 
 
 
Once the Financial Reports are published, the Board anticipates that trading in 
the Company's shares on the AIM market of the London Stock Exchange will 
recommence. 
 
 
Accordingly, a date for the AGM will be set once the Financial Reports are 
finalised by the Company and its auditors. 
 
 
* * ENDS * * 
 
 
 
 
For further information please visit www.centralafricangold.com or contact: 
 
 
+----------------+------------------------------+-------------------------+ 
| Roy Pitchford  | Central African Gold Plc     | Tel: +44(0)77 9390 9985 | 
| / Craig        |                              | Tel: +27(0)11 317 3654  | 
| Campbell       |                              |                         | 
|                |                              |                         | 
+----------------+------------------------------+-------------------------+ 
| Stuart         | Strand Partners Limited      | Tel: +44(0)20 7409 3494 | 
| Faulkner/      |                              |                         | 
| James Spinney  |                              |                         | 
|                |                              |                         | 
+----------------+------------------------------+-------------------------+ 
| Hugo de Salis  | St Brides Media and Finance  | Tel: +44(0)20 7236 1177 | 
| / Felicity     | Ltd                          |                         | 
| Edwards        |                              |                         | 
+----------------+------------------------------+-------------------------+ 
| Panico         | Capital Hill Corporate       | Tel: +27(0)11 282 2360  | 
| Theocharides / | Finance (Pty) Ltd            |                         | 
| Sarah Williams |                              |                         | 
+----------------+------------------------------+-------------------------+ 
|                |                              |                         | 
+----------------+------------------------------+-------------------------+ 
| Alan Campbell  | Colonial Resources Limited   | Tel: +61 406 244 687    | 
| Alec Pismiris  |                              | Tel: +61 8 9481 8760    | 
+----------------+------------------------------+-------------------------+ 
 
 
Notes to Editors 
Central African Gold Plc is an established gold mining company with a portfolio 
of production and exploration assets in Africa. The Company has two subsidiaries 
in Zimbabwe: Falcon Gold Zimbabwe Limited (84.7 per cent. owned) and Olympus 
Gold Mines Limited (100 per cent. owned); and a subsidiary in southern Botswana 
with a licence covering 436km² of the extension of the Kraaipan greenstone belt 
from South Africa. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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