Central African Gold Plc / Ticker: CAN / Market: AIM / Sub-sector: Gold Mining

23 May 2007

Central African Gold Plc (“CAG” or “the Company”)

Final Results

 

The Board is pleased to announce the Company’s results for the year ended 31 December 2006.

 

Highlights:

 

• Formed a CAG managerial and operational team with proven delivery on projects in Africa
• Raised £9 million (US$17 million) on the AIM market operated by the London Stock Exchange in April to fund growth and development
• Licence to explore Medinandi prospect gained within the Songhoi Ressources SA venture
• Twenty-three gold exploration licences acquired in southern and western Mali, with further drilling and exploration planned for 2007
• Raised £17 million (US$33 million) in December for acquisition of Bibiani gold mine in Ghana
• Completed the purchase of Bibiani gold mine in late 2006
• Immediate production and revenue generation at Bibiani gold mine
• Acquired Falcon Gold Zimbabwe and Olympus Gold Mines effective 1 March 2007, for just over US$6 million, providing further immediate production to the Company

 

Extract from the Company’s Annual Report:

 

It has been a landmark year for CAG that has seen the Company grow from a cash shell into a company of substance. We have taken our first steps towards achieving our goal of becoming a mid-tier producing company with a world class exploration portfolio.

 

There were two main areas of significant change and progress during the year:

• During 2006, we put in place a knowledgeable and experienced team, with an excellent balance of exploration, mining, engineering, financial and management competence. What makes us unique is that for a company of our size and positioning, we have an unrivalled technical skills base supported by in-the-field and on-the-ground know-how. We are also able to use proprietary in-house software applications and expertise that result in rapid, high-level targeting of opportunities and the expeditious interpretation of data, thus significantly shortening the exploration pipeline.
• At the beginning of 2006, CAG had in its portfolio a number of exploration properties in Mali and Botswana on which little progress had been made. By the end of the financial year, we are able to report the conclusion of the acquisition of a producing asset, the Bibiani gold mine, and approval to transfer prospecting licences in Ghana; the initiation of the exploration programme at the Medinandi prospect in west Mali; and the regional data interrogation and field validation of the balance of the Mali and Botswana portfolios. Post year-end, we have added to our initial production base through the purchase of controlling interests in Falcon and Olympus gold mines in Zimbabwe.

 

Our shareholders have continued to display confidence in CAG. Two well-subscribed share placements on London's AIM market, in April and December, have reflected the market's belief in our progress and supported our growth strategy at a time when the market was less generous than it had been for some time. Most importantly, our market successes have enabled the purchase of the Bibiani gold mine, which we believe is both an undervalued and underperforming asset that we can turn to significant account over the next two years.

 

We have taken on this mine with a view to turning an operation currently set to produce 50,000 ounces in FY2007, into a substantial underground operation with an annual production of at least 110,000 ounces by the end of 2008. We believe that, geologically, Bibiani gold mine has the right pedigree to deliver the ounces required of a world-class orebody, situated as it is on the Sefwi-Bibiani greenstone belt, host to 17 million ounces of gold mineral resources.

 

The size and scale of Bibiani fits comfortably into CAG's profile, far more so than into that of a large mining group. We have confidence that, by concertedly applying innovative geological techniques and using our experience with similar orebodies in Africa, we can generate a better understanding of the Bibiani orebody and employ appropriate and cost-effective mining methods. Our approach seeks to remodel, drill and sample the Bibiani orebody in order to:

 

• increase the resource base and assist with the bulk underground development programme due to start in the third quarter of 2007;
• target immediate production of 40,000 ounces a year from the re-treatment of tailings and 10,000 ounces from the underground production for FY2007; and
• continue with exploration on the mining lease and two prospecting licence areas; and in particular, intensify our exploration efforts on 15 prioritised targets. We feel confident we can expand our current resource base of 1.473 million ounces with continuing exploration and development work. In the short space of time we have owned the operations, we have seen the gold inventory increase from 0.9 million ounces to 1.473 million ounces.

 

Our second area of focus is Mali, boasting some of the lowest-cost gold mines in the world. The establishment of two exploration companies, entered into in 2006, gave us access to some 23 properties, six in west Mali and 17 in south Mali, a substantial footprint in a prospective and investor-friendly region. Phase 1 of a 15,000-metre reverse circulation (“RC”) and diamond drilling (“DD”) programme has begun on the Medinandi prospect in west Mali, with in excess of 9,000 metres of RC drilling completed to date. Encouraging mineralisation has been encountered; we await the assay results and it is anticipated that an interim resource statement on this property will be released shortly. Good progress has been made with the balance of the portfolio in terms of regional data interrogation and field validation, with properties being aggressively prioritised for follow-up exploration.

 

Our presence in Botswana on the Kraaipan greenstone belt (extending from South Africa into southern Botswana) arises from a 53% controlling stake in an Australian-based exploration company, which owns the rights to an area covering 872km² of the north-west extension of the Kraaipan belt. Airborne magnetic and electromagnetic surveys have been followed up with limited drilling, and the ensuing year will include follow-up ground work on targets identified through available data collation and re-interpretation.

 

Post year end, we acquired an 84.7% stake in Falcon Gold Zimbabwe Limited and 100% of the issued share capital of Olympus Gold Mines Limited (effective from 1 March 2007). Falgold and Olympus both have the rights to extensive claim areas located throughout Zimbabwe, with mining activities and exploration properties centred on the Kadoma, Shurugwe and Bulawayo regions. The combined resource estimates for both companies stands at 2.47 million ounces of gold with JORC-compliant reserves of 631,000 ounces of gold. CAG’s attributable portion of these reserves and resources is 578,000 and 2,167,000 ounces respectively.

 

These acquisitions complement not only our gold production profile and strategy in Ghana, but also the greenfields exploration portfolio being established in Mali and Botswana. Zimbabwe hosts arguably one of the highest gold-endowed Archaean greenstone belts in the world, allowing us to rapidly leverage our position up the value curve for our shareholders in an attractive gold price environment.

 

A mining company's portfolio does not just include gold producing mines and exploration properties. The nature of our business means we are intimately involved in both the environment and the communities of the areas that support our activities. It is our responsibility to ensure that our employees have the ability to feed, educate and nurture their families, and that there will be an environment left behind, long after we are gone, that will continue to sustain them. We believe that a company must be a responsible citizen of the community in which it operates. Our approach is not one of subsidisation. We want the programmes that we initiate to be economically viable and non-paternalistic; importantly, we want to get to those areas where we can make a difference by engaging with the very communities in which we are based. These are our aims, and moving forward into 2007 our corporate citizenship programme will take shape to ensure that the benefits reach the right people.

 

We believe in the value of people, and in our team. I am confident that we have, and continue to attract, the right people for the work that lies ahead. It bears repeating that our team has extensive African experience: many of them have been born and/or raised in Africa, the value of which cannot be underestimated, and have track records of working in challenging economic and social conditions across the continent. The coming year will see us using our growth opportunities to establish our credibility in the market, with a view to strengthening our production base around our centres of strategic excellence and in regions selected for their geological prospectivity and value accretion. We also intend examining the possibility and logic of extending our capital base beyond our London listing. We are confident of our ability to deliver on the promises that we have made to shareholders and look forward to reporting to them on a regular basis during the year ahead.

 

Financial review

 

The 2006 financial year was a year of transition, opportunity and growth for CAG and the group.

 

To facilitate these developments, and directed by the new management team, a placing of 100 million shares at nine pence per share was completed in April 2006, raising just over £9 million (US$17 million).

 

After the acceptance of a final binding offer of £18 million (US$36 million) for the Bibiani gold mine and £2 million (US$4 million) for the two adjacent prospecting licences in Ghana from AngloGold Ashanti Ghana Limited, a further 188.8 million shares were issued in December 2006 at nine pence per share. This placement raised just over £17 million, or US$33 million, the balance of the purchase price being made up from internal funds.

 

In order to fund the working capital requirements for the further development of the Bibiani gold mine, a debt facility of £8 million (US$15 million) was concluded with Investec Bank Limited in January 2007. The facility is for a period of 30 months and attracts interest at LIBOR plus 2.5%.

 

The operating results of the group reflected a loss of £3.9 million or 1.69 pence per share, mainly resulting from the increase in expenditure arising from the increased corporate activity in the group. Interest received increased to £0.3 million owing to increased levels of cash on hand. In the last month of the financial year, CAG recorded a gross profit of £0.2 million from Bibiani gold mine. This reflects the key change of the Company becoming a producer.

 

The group’s net asset value rose to £24.7 million, from £1.3 million, mainly due to the acquisition of Bibiani gold mine, its associated assets and net current assets and related fund raising. Exploration assets increased by £0.3 million, reflecting the raised level of exploration activity in Mali on the Medinandi properties. Cash at year-end was £5.1 million (of which £1.4 million is restricted) compared with £1.2 million at the end of 2005.

 

An amount of £4.0 million was utilised in operations with a further £18.7 million being devoted to investing activities. These outflows were funded through the placement of shares generating £25.2 million net of expenses, resulting in an overall increase in cash of £3.9 million.

 

Financial results

 

Both the group and the parent company financial statements have been prepared in accordance with IFRS as adopted by the EU and applicable laws. Extracts from these financial statements for the year ended 31 December 2006, are detailed below.

 

Consolidated income statement

For the year ended 31 December 2006

 

		Year to 31 December 2006 £’000	Year to 31 December  2005 £’000
Revenue		487	-
Cost of Sales		(270)	-
Gross Profit		217	-
Administrative charges		(5,248)	(314)
	Administrative expenses	(3,169)	(310)
	Share based payments	(2,079)	(4)
Fair values adjustments		945
Operating loss before financing costs		(4,086)	(314)
Financial income		338	35
Financial expense		(212)	-
Loss before tax		(3,960)	(279)
Income tax expense		(9)	-
Loss for the year		(3,969)	(279)
Attributable to:
	Equity holders of the parent	(3,938)	(250)
	Minority interest	(31)	(29)
Loss for the year		(3,969)	(279)
Basic and diluted earning per share (pence)		(1.69p)	(0.15p)

 

All activities were in respect of continuing operations

 

Consolidated balance sheets

For the year ended 31 December 2006

 

		Group		Company
		Year to 31 December 2006 £’000	Year to 31 December 2005 £’000	Year to 31 December 2006 £’000	Year to 31 December 2005 £’000
Assets
	Investment and loans	-	-	18,768	246
	Property, plant and equipment	17,131	-	-	-
	Exploration assets	560	287	-	-
Total non-current assets		17,691	287	18,768	246
	Inventories	2,827	-	-	-
	Trade and other receivables	2,330	52	1,146	-
	Amount due by subsidiaries			2,507	50
	Cash and cash equivalents	5,076	1,194	3,207	1,121
Total current assets		10,233	1,246	6,860	1,171
Total assets		27,924	1,533	25,628	1,417
Equity
	Share capital	459	166	459	166
	Share premium	26,389	1,460	26,389	1,460
	Other reserves	68	-	-	-
	Retained earnings	(2,216)	(357)	(1,335)	(328)
Total equity attributable to equity holders of the parent		24,700	1,269	25,513	1,298
Minority interest		39	87	-	-
Total equity		24,739	1,356	25,513	1,298
Liabilities
	Provisions	1,389	-	-	-
	Deferred taxation	383	-	-	-
Total non-current liabilities		1,772	-	-	-
	Trade and other payables	1,404	177	115	119
	Taxation	9	-	-	-
Total current liabilities		1,413	177	115	119
Total liabilities		3,185	177	115	119
Total equity and liabilities		27,924	1,533	25,628	1,417

 

Statement of cash flows

For the year ended 31 December 2006

 

	Group		Company
	Year to 31 December 2006 £’000	Year to 31 December 2005 £’000	Year to 31 December 2006 £’000	Year to 31 December 2005 £’000
Cash flows from operating activities
Loss before tax	(3,960)	(279)	(2,846)	(217)
Adjusted for:
Financial income	(338)	(35)	(336)	(35)
Financial expense	212	-	-	-
Share based payment	2,079	4	1,787	4
Depreciation	97	-	-	-
Impairment	25	-	-	-
Fair value adjustment	(945)	-	-	-
Exchange rate adjustments	(153)	(3)	-	-
Increase in inventories	(263)	-	-	-
(Increase)/decrease in trade and other receivables	(1,774)	15	(3,551)	17
Increase/(decrease) in trade and other payables	1,023	124	(4)	80
Net cash utilised in  operating activities	(3,997)	(174)	(4,950)	(151)
Cash flows from investing activities
Interest received	338	35	336	35
Acquisition of business net cash	(18,385)	-	-	-
Acquisition of exploration assets	(298)	(104)	-	-
Acquisition of property, plant and equipment	(378)	-	-	-
Investment and advances	-	-	(18,522)	-
Net cash from investing activities	(18,723)	(69)	(18,186)	35
Cash flow from financing activities
Proceeds from the issue of share capital	25,222	-	25,222	-
Net cash from financing activities	25,222		25,222
Net increase in cash and cash equivalents	2,502	(243)	2,086	(116)
Cash and cash equivalents at 1 January	1,194	1,437	1,121	1,237
Cash acquired (restricted)	1,390	-	-	-
Effect of exchange rate fluctuations on cash held	(10)	-	-	-
Cash and cash equivalents at 31 December	5,076	1,194	3,207	1,121

 

Statement of recognised income and expenses

For the year ended 31 December 2006

 

		Group		Company
		Year to 31 December 2006 £’000	Year to 31 December 2005 £’000	Year to 31 December 2006 £’000	Year to 31 December 2005 £’000
Foreign exchange translation differences		68	-	-	-
Net income recognised directly in equity		68	-	-	-
Loss for the period		(3,969)	(279)	2,847	(218)
Total recognised income and expense for the year		(3,901)	(279)	2,847	(218)
Attributable to:
	Equity holders of the parent	(3,870)	(250)	2,847	(218)
	Minority interest	(31)	(29)	-	-
		(3,901)	(279)	2,847	(218)

 

Annual report:

 

The Company’s Annual Report will be sent to shareholders on or about 23 May 2007. 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, 3rd Floor Aldermary House, 10-15 Queen Street, London, EC4N 1TX. A full copy of the report may be downloaded from our website at www.centralafricangold.com.

 

Annual General Meeting:

 

Notice is hereby given that the 2007 Annual General Meeting of the company will be held at St Brides Media and Finance Ltd, 3rd Floor Aldermary House, 10-15 Queen Street, London, EC4N 1TX on 15 June 2007 at 10:00am. Further details on the Notice of Meeting and the resolutions which will be proposed are available on our website at www.centralafricangold.com.

 

For further information please contact or visit www.centralafricangold.com or contact:

Greg Hunter                 Central African Gold Plc                       Tel: +27 (0)82 882 4222

In London:

Hugo de Salis               St Brides Media & Finance Ltd            Tel: +44 (0)20 7242 4477

Felicity Edwards           St Brides Media & Finance Ltd            Tel: +44 (0)20 7242 4477

Simon Raggett              Strand Partners Limited                        Tel: +44 (0)20 7409 3494

Braden Saunders          Strand Partners Limited                        Tel: +44 (0)20 7409 3494

In South Africa:

Nicole Broome Central African Gold                                         Tel +27 11 676 2500

Mobile +27 83 601 1702

Charmane Russell         Russell and Associates                          Tel: + 27 11 880 3924

                                                                                                Mobile + 27 82 372 5816

 

 

 

Isabel Crossley

St Brides Media & Finance Ltd

Aldermary House, 10-15 Queen Street

London EC4N 1TX

Tel: 020 7242 4477

Fax: 020 7651 8689

Email: isabel@sbmf.co.uk