Central Rand Gold Limited

(Incorporated as a company with limited liability under the laws of Guernsey, Company Number 45108)

(Incorporated as an external company with limited liability under the laws of South Africa, Registration number 2007/0192231/10)

ISIN: GG00B92NXM24

LSE share code: CRND   JSE share code: CRD

("Central Rand Gold" or the "Company" or "CRG")

Placing, Subscription and Exercise of Redstone Warrants

Central Rand Gold is pleased to announce that it is undertaking a placing and subscription to raise £1.02 million through the placing (the "Placing") of 5,000,000 new ordinary shares ("Placing Shares") and the offer for subscription (the "Subscription") of 5,200,000 new ordinary shares "Subscription Shares") at a price of 10 pence per ordinary share ("Placing Price").  Additionally Redstone Capital Limited ("Redstone") is exercising 1,800,000 warrants over 1,800,000 ordinary shares at a price of 8.78 pence per ordinary share ("Redstone Warrants"). The funds from the Placing, Subscription and the exercise of the Redstone Warrants will provide gross proceeds of US$ 1.85 million to the Company.

Background and Reasons for the Placing

Prior to the decision by the Company to temporarily suspend its underground operations in October 2014, as a result of the delay in full commissioning of the High Density Sludge Plant ("HDSP"), the focus was to provide the HDSP with as much time as possible to drop the water table, which in turn would enable to Company to re-access its mining areas. The Company was forced to reduce its mine production and staff complement, in July 2014 based on the reef that was available above the water table, which at the time was approximately 160 metres below surface. The reduction in mine production, forced the Company to utilise old low grade sand, rock and slimes dumps to keep the Metallurgical Plant operational. As a result of this change to its mining production areas, the average feed grade dropped to an average of 1.11g/t. 

The Company considered alternate approaches to mining some of its more technically challenging surface resources. The introduction of mechanical ripping and other rock breaking technology has opened up SAMREC Compliant Exploration Target material of between 91,000 and 350,000 tonnes of reef running up to 2.5g/t. The Company commenced surface mining in early November 2014, with the first feedstock going to the Metallurgical Plant in mid-November 2014, and the average grade has improved to 2.21g/t.

The board of directors of Central Rand Gold (the "Board") considers that it has identified sufficient ore to sustain the existing operation at similar production levels of approximately 18,000 - 20,000 tonnes per month for at least the next 12 to 18 months. CRG's operational team has significant experience in the surface mining of these thin reefs gained as a result of the past five years of slot mining. In 2013, the cost per tonne of surface mining was US$25 per tonne compared to underground mining costs of US$48 per tonne. The Company estimates that the all in cash costs (mining, metallurgical and head office costs) at the estimated production rate and grade can be between US$800 - US$900 per ounce.

The temporary cession of underground activities will allow the operational team to focus its attention on surface operations while the final upgrade of the thickeners at the HDSP plant is being completed, which will in turn allow the water table to be reduced to the extent that the Company can re-access to the high grade underground working areas.

In addition, to the reactivation of existing surface Resources and Exploration Targets, the Company has conducted a regional survey focussing on known surface gold sources. The study has identified a number of interesting alternative and easily accessible target mining operations which may be available to the Company. Given that a number of the target mining areas are outside Central Rand Gold's existing mining right areas, the Board is presently engaged in numerous commercial discussions with a view to securing an option to mine these areas. These initiatives are focused on maintaining the Company's production rate to ensure the Company moves into a cash positive position.

Memoranda of Understanding

Over the last 14 months, the Company has been involved in a significant marketing campaign, of the CRG asset base, to a predominately Asian audience. This has resulted in site visits to the Company's operational site by a number of interested investors. As announced on 2 December 2014, the Company has entered into three separate non-binding Memoranda of Understanding with Hiria Group Company Limited ("Hiria"), Beijing Ankong Investment ("Ankong") and with Shengbang Jiabo (Beijing) Consulting Company Limited ("Shengbang") ("MOU's"). The MOU's are all on substantively consistent terms and contemplate the potential disposal of 100 per cent. of the shares held by Central Rand Gold in its wholly-owned subsidiary, Central Rand Gold (Netherlands Antilles) N.V. (" CRGNV") for a cash consideration of up to US$150 million. Further, the Company has been approached by a number of other parties regarding a potential sale of Central Rand Gold's shareholding in CRGNV, with these discussions ongoing. CRGNV owns the assets of the Group.

The MOU's are subject to a number of conditions including:

·       mutual completion of due diligence by both Central Rand Gold and the MOU signatories;

·       all parties obtaining necessary regulatory and exchange approvals for the potential sale of CRGNV; and

·       the execution of a formal share sale agreement for the sale of CRGNV anticipated by 31 March 2015.

Given the number of approaches that have been made, the Company has established a virtual data room that has been made available to interested parties selected to participate, based on their credentials and expressions of interest. In addition to Hiria, Ankong and Shengbang which have all entered into separate MOUs with the Company, there are a further three parties which have entered the virtual data room.  The Company wishes to ensure that all interested parties are treated equitably and have access to identical information. Appropriate non-disclosure agreements will be signed before any non-public information is disclosed to these third parties.   A number of the interested parties in the virtual data room have already conducted physical site visits to the Company's operations. The Company is presently working with all the remaining interested parties to arrange site visits which are expected to occur throughout December 2014 and January 2015.

In addition to shareholder approval, it is anticipated that the transaction will require South African Ministerial approval, in terms of section 11 of the Mineral and Petroleum Resources Development (Act 28 of 2002).

The Board cautions that at this time there can be no certainty that the discussions with any of the interested parties will lead to a formal share sale agreement being executed nor that the potential sale of CRGNV will be completed.

Operational focus into 2015

The focus of the Company over the next 12 months will be on the following key areas:

Resource

The Company will target its current unmined surface resource, within its mining right area, through open cast mining. Central Rand has identified up to 350,000 tonnes of ore at an estimated average grade of 2.5g/t, which should be sufficient for 12 - 18 months of production feed. Additionally, The Company will seek other surface mining opportunities and feedstock sources, to assist the Company in achieving its Metallurgical Plant capacity. This feedstock, will either be from lower grade rock dumps or via trial operations currently underway where the Company is trialling a sweepings and vampings operation at the East Rand of Johannesburg, which should provide the Company with high grade but low volume feed material.

The Company has sufficient skills to effectively mine via open cast as it has been exploiting this shallow resource base since 2009.

The Board will continue to monitor the underground water levels, so that it can establish when it can re-commence underground operations. Given that the HDSP upgrade is not anticipated to be completed until the end of the first half of 2015, underground mining will re-commence during the latter part of 2015 or early 2016 once the water table is below 180 mbs.

Production

The focus of the Company is to utilize the current Metallurgical Plant capacity, of 25,000tpm, with best available alternative feed material and is currently targeting a minimum production 18,000tpm from its surface mining operations. In order to ensure full utilization of the Metallurgical Plant, the Company is also engaged in discussions with smaller mining operations to toll treat their material through the Company's plant. The Company's target is to maintain its total cash cost between US$800 to US$900 per ounce during 2015.  

Potential disposal of CRGNV

As previously announced, the potential disposal of the Company's subsidiary CRGNV is dependent on the satisfactory conclusion of due diligence.  Therefore, over the coming months, the Company will continue to assist all interested parties, by providing all relevant information, so that the due diligence can be completed within the provided time. Once this process has been completed the Company can then select the preferred bidder with the aim of executing a formal share sale agreement.

Use of Proceeds

The funds raised will be utilised to strengthen the Company's balance sheet and ensure that it has sufficient working capital to undertake:

Restructuring costs

Restructuring costs include the costs associated with staff reductions, removal of underground equipment to surface and site establishment costs to increase surface mining production.  Once the restructuring has been completed the Company will have the appropriate cost base to ensure a viable cash positive business from its surface mining operations. In addition, the protection of the underground resource will remain a priority for the Company.

Disposal of CRGNV

To ensure a timely execution of the sales transaction, the Company will be required to appoint advisors that are proficient in the laws and regulations of China, the United Kingdom and South Africa,

Placing and Subscription

The Company has conditionally raised gross proceeds of approximately USD1.60 million (£1.02 million) through the proposed issue of the Placing Shares and the Subscription Shares at a price of 10 pence per ordinary share. The Placing Shares have been conditionally placed with new and existing investors. The Placing Price represents a discount of approximately 20.79 per cent. to the middle market closing price of 12.625 pence per ordinary share on 16 December 2014, being the last practicable date prior to the announcement of the Placing and Subscription.  The Placing Shares and the Subscription Shares will represent approximately 11.70 per cent. of the enlarged issued share capital.

The Placing and Subscription are conditional upon admission of the 12,000,000 new ordinary shares issued pursuant to the Placing, the Subscription and the exercise of the Redstone Warrants becoming effective on or before 8.00 a.m. on 19 December 2014 (or such later time and/or date as the Company and Charles Stanley may agree, but in any event no later than 8.00 a.m. on 5 January 2015).

Redstone Warrants

The Company will raise additional gross proceeds of USD 0.25 million (£0.16 million) through the exercise of 1,800,000 warrants over 1,800,000 ordinary shares at a price of 8.78 pence per ordinary share by Redstone Capital. 

Holdings

For the purposes of the Takeover Code, Mr Gu is part of the Redstone concert party as outlined in the Company's circular to shareholders dated 2 August 2013.  Following the Placing, the Subscription and the exercise of the Redstone Warrants, the Redstone concert party will be interested in 31.4% of the Company's enlarged issued share capital.  The holdings of the Redstone concert party post admission and on the assumption of the full conversion of Redstone's loan notes and warrants into ordinary shares will be as follows:

*Nathan Taylor and Jason Hou, directors of Central Rand Gold, are also shareholders in Redstone and therefore have a beneficial interest in the shares held by Redstone. 

Settlement and Dealings

The 12,000,000 new ordinary shares to be issued pursuant to the Placing, the Subscription and the exercise of the Redstone Warrants will rank pari passu in all respects with the existing ordinary shares, including the right to receive all dividends and other distributions declared, made or paid on the existing ordinary shares on or after admission.

Application has been made for the 12,000,000 new ordinary shares to be admitted to trading on AIM and AltX and it is expected that admission will occur and dealings in the new ordinary shares will commence on AIM at 8.00 a.m. on 19 December 2014 and on AltX at 9.00 a.m. (South African time) on 19 December 2014.

Following admission of the new ordinary shares, the total issued share capital of the Company will increase to 87,180,808 ordinary shares. The Company does not hold any shares in treasury and therefore the total number of voting rights is 87,180,808 ordinary shares. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a charge to their interest in, the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

For further information, please contact:

Central Rand Gold                                                                                                                            +27 (0) 87 310 4400

Johan du Toit / Nathan Taylor

Charles Stanley Securities Limited                                                                                            +44 (0) 20 7149 6000

Marc Milmo / Mark Taylor

Merchantec Capital                                                                                                                            +27 (0) 11 325 6363

Marcel Goncalves / Monique Martinez

Jenni Newman Public Relations Proprietary Limited                                                                   +27 (0) 11 506 735

Jenni Newman

Johannesburg

17 December 2014

Sponsor

Merchantec Capital

Charles Stanley Securities, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as nominated adviser and broker to Central Rand Gold for the purpose of the AIM Rules in connection with the Placing and, as such, its responsibilities are owed solely to the London Stock Exchange and are not owed to the Company or to any Director or to any other person or entity. Charles Stanley Securities will not be responsible to any person other than the Company for providing the protections afforded to clients of Charles Stanley Securities or for providing advice to any other person in connection with the Placing or any other matter referred to herein. Charles Stanley Securities has not authorised the contents of, or any part of, this document, and no liability whatsoever is accepted by Charles Stanley Securities for the accuracy of any information or opinions contained in this document or for the omission of any material information.

This announcement does not constitute, or form part of the Placing or any invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company nor shall this announcement or any part of it, or the fact of its distribution, form the basis of, or be relied on, in connection with or act as any inducement to enter into any contract or commitment whatsoever with respect to the Placing or otherwise.