CRG shares rocket by 200%

Much beleaguered and controversial miner, Central Rand Gold (CRG), said it had come to an agreement with the Department of Mineral Resources (DMR) to set aside a decision to cancel the company’s mining right.

12 December 2011 | CHRISTY FILEN

Much beleaguered and controversial miner, Central Rand Gold (CRG), said it had come to an agreement with the Department of Mineral Resources (DMR) to set aside a decision to cancel the company’s mining right.

The company’s share price rocketed upwards of 200% yesterday on the news.

DMR spokesman, Zingaphi Jakuja, said there was “no formal settlement” and that “DMR lawyers and CRG lawyers are speaking and we cannot at this stage reveal further details”.

The final decision ratifying the agreement reached between the DMR and CRG is to be made on December 22 in the High Court by way of an unopposed consent order, CRG said.

CRG said it would continue to discuss its social and labour development plans with the DMR in order to agree on a plan that is more appropriate for CRG’s revised mining plans.

Patrick Malaza, CFO of CRG, said its revised mine plan makes provision for a much smaller scale mine and expects production to increase from 1 500oz per month to approximately 6 000 to 7 000oz per month by 2013.

The operations are currently producing around 1 000oz per month Malaza said.

The original mining right application assumed more than 50 000oz per month.

The DMR cancelled CRG’s mining right in September citing non-compliance with its social and labour plan (SLP), mining work programme and environmental management programme.

This was subsequently suspended in October pending the finalisation of review proceedings allowing it to resume mining operations.

CRG committed to expenditure of R32,9 million in the first two years of its SLP but only spent R18,8 million citing lower staff numbers and unavailability of suitable land.

The reduction it said was due to a change in mining plan concomitant with acid mine water drainage issues.

Malaza said: “Our reason for not fully complying with our SLP programme was because we were forced into a corner due to unrealised mine production. Our original plan foresaw production of 4,2moz over five to six years but this has not been the case as most of our resources are under water.”

Godfrey Makunene, a director of the Federation for a Sustainable Environment (FSE), said the potential setting aside of the cancellation of Central Rand Gold’s (CRG) mining right would be a bad decision.

He said “the interest of management is to misuse investors’ money for their own benefit” and that “people have lost confidence from a community point of view”.

“The company has failed to honour their commitments and they come up with all sorts of plans that are unproductive,” Makunene said.

CRG’s dotted history includes reports of excessive expenditure, bearish production forecasts and associations with renowned sushi convicted fraudster Kenny Kunene.

An ongoing dispute with its BEE shareholder (Puno Gold Investments) and local community dissent are also part of the controversy surrounding the company.

The miner said last month that there was still no resolution to its dispute with Puno Gold and that it had filed court papers.

The dispute relates to funding provisions in terms of a shareholder agreement.

The filing seeks to discharge an interdict that prohibits CRG from calling on an option to acquire Puno’s entire shareholding. Alternatively, CRG requested permission to proceed with arbitration.

If the application is unopposed, the hearing is expected to commence today.

“We are waiting for confirmation but think they (Puno) have responded, in which case it won’t take place now but only in January or February next year,” Malaza said.

– christyf@moneyweb.co.za