CRG shares slide

CRG hit by acid mine concerns

Feb 3, 2011 11:22 PM | By Reuters

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Central Rand Gold's share price fell sharply after the company, which has assets in southern Johannesburg, again raised concern about acid mine drainage.

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CRG said yesterday that it had not received a formal undertaking from the government on how to deal with the problem, while recent heavy rains and flooding in Gauteng had worsened the problem and hastened the water table's rise.

It had repeatedly received strong indications of support from the government in providing funding to deal with the problem and assurances of commitment to a joint solution throughout the year, ultimately undertaking to communicate a decision by early last month.
However, no formal undertaking had been received.
The company said if a plan was not identified by the end of next month its prospects would need to be re-evaluated. By 3pm yesterday the share price was down 10c, or 28.6%, to 25c.
CRG and other affected mining companies support the first phase of the interim solution being considered by the government, which involves construction of a submersible pump station that can lift 72 megalitres of acid water a day.
The plan envisages that the water will be partially treated through the existing high-density sludge plant at East Rand Proprietary Mines. The full cost of the project is estimated at $26-million, with the company's proportionate funding expected at about $4-million.
To protect the resource base above 250m below surface, the project had to start construction by the end of the first quarter of this year, it said.
"As there is no alternate proposal within the time-frame available to resolve this problem, CRG unilaterally ordered the longest lead item, ie the submersible pumps, in August last year at a cost of $4-million, but the company cannot shoulder the burden of the legacy from 120 years of mining along the central area of the Witwatersrand and complete or operate this project on its own.
"[Without] clear commitment to this joint project by the end of the first quarter of 2011, CRG faces the very real prospect of inaccessibility to its reserves below 250m below surface by the end of the year."
The company said it was in advanced discussions and continued to engage with the government in an effort to resolve the acid mine drainage and water table issue.
"Further updates will be made as this situation unfolds. Shareholders should be in no doubt that if a clear and positive way forward is not identified by the end of March, the prospects of the company will need to be re-evaluated."