Central Rand Gold Shares Bounces Back

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Shares of Central Rand Gold (LSE:CRND) bounced back since the opening of trading this week, following the consent order issued on Monday, December 12th, by the High Court in South Africa, setting aside the decision to cancel the mining rights of Central Rand Gold’s wholly-owned subsidiary, Ferreira Estate and Investment Company (FEIC).

CRND shares closed at 0.70p, up by 19.8% from yesterday’s value of 0.58p. On the first day of trading, Monday, December 12th, shares rose by 80.72% from last week’s close of 0.415p to 0.75p. Shares went down by 8.67% the following day to 0.685p and went down again by 15.32% to 0.58p in yesterday’s trading. Trading today reached 0.76p before settling at 0.70p.

Cancellation of Mining Rights

On September 22, 2011, the Minister of Mineral Resources of the Republic of South Africa decided to revoke the mining rights of Central Rand Gold in contravention of the law relating to mining work programme and social labour plan.

The decision to cancel CRND’s mining rights was based on the failure to meet the terms of its mining rights to spend R32.9 million on Social Labour Projects (SLP) for the first two years of operation. CRND admitted that the company only spent R18.8 million.

According to the response of CRND regarding the cancellation, the company encountered challenges in their operation, thereby affecting their financials. To support their claim, the same document stated that only 431,000 ounces were realized from the targeted 3,250,000 ounces, due to Acid Mine Drainage (AMD). CRND acknowledged the shortfall of R14 million, but sought the Ministry to consider the purchase of submersible pumps used stop the rising of water in the Central Basin as part of the social and labour commitment. The company stated that the pumps which cost R35 million will not only benefit them but every company who mines in the Central Basin because of its capacity to stop the rising of water in the whole basin.

Drop in Share Price

Central Rand Gold’s shares were traded at 0.60p prior to September 22nd. When the cancellation was issued, shares dropped to 0.53p and hit an all year low of 0.19p on September 29th, a week after the revokation of mining rights. From then, shares slowly rose hitting 0.44p on October 24th, the day the High Court of Pretoria issued a temporary suspension of the decision of the Ministry of Mineral Resources. From then on, shares fluctuated between 0.33p and 0.43p until it went back to its price level before the mining rights cancellation.

Resumption of Operations

With the suspension of the cancellation of the mining right, Central Rand Gold resumed operations. Underground mining was again started on November 1st , with the company estimating 200,000 tonnes of ore accessible, according to the interim management statement released on November 18th. The said statement stated a total of 13,347 tonnes from both surface and underground mining sent to stockpile and metallurgical plant. The company estimates between 53,000 to 102,000 tonnes of target material still remained to be explored.

The third quarter report put 223,999 tonnes of exploration target material with an average grade of 1.7 to 1.9 grams, 3.6 to 5.5 grams, and 2.8 to 3.3 grams, per tonne in longhole stoping, conventional stoping, and surface mining procedures, respectively.

Gold Production and Financial Status

Production of gold was affected by the mining rights cancellation. According to the report released by CRND, 4,928 ounces of gold were produced valued at a cost of US$1,401 per ounce. The same report also stated 12,116 ounces of gold produced as of October 2011. Meanwhile, cash and cash equivalent were at US$4.6 million as of October 31, 2011.

 Notice of Cancellation of Mining Rights
↑ CRNG Response to Revokation of Mining Rights
↑ Interim Management Update, November 2011

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