Gold & Silver - Ready, Steady, Gold!

LONDON (ResourceInvestor.com) -- There are no prizes for guessing the commodity or the location of Central African Gold. And no prizes either for guessing the main objective of this mining and exploration company, as it is typical of many others.

Yes, Central African Gold plc is aiming to produce gold in Central Africa, to do so as quickly and profitably as possible (70,000+ ounces targeted for this year), and to back up their producing operations with a world-class exploration portfolio which will provide a pipeline of future opportunities.

Although the objective may sound familiar what really sets this company apart is its management team, knowledge base and innovative use of technology which should enable it to find and develop mines more quickly than its peers and thus to deliver results.

Certainly since the new management team was engaged in March 2006, CAG has been quick off the mark.

Through a number of acquisitions and financings it has already put in place the building blocks for an innovative, high growth, results-driven company which is focussed on delivery. In doing so it has taken the market capitalisation of the company from around $10 million at the beginning of 2006 to over $95 million today.

The building blocks include:

1. An experienced management team with a track record of working together.

Unlike many other companies which start with a geological asset and then set about finding finance and a team, the starting point in this case was effectively the team who set out to develop the company from a shell (and who liked the CAG shell as it already had some promising exploration assets in Mali where they had previous experience).

The team has an impressive set of credentials (see the website for details) which include broad-based exploration, mining, engineering, metallurgical and financial skills, and a track record of working together, building exploration portfolios, and managing six underground greenstone gold mines which produced 200,000 ounces per year.

As CEO Greg Hunter summarised in a meeting with RI, “We’ve already been there, done that.”

2. A leading-edge technological team with extensive skills, systems, databases, software and ASTER satellite data coverage of most of Africa.

Right at the outset the management team negotiated to buy Geodatec, a company which specialised in geographic information systems, remote sensing and geo-spatial data analysis, and to bring the team with all its data sets, libraries, techniques, proprietary systems and software in-house.

This has given CAG access to a number of techniques such as advanced image enhancement and interpretation of ASTER satellite data covering most of Africa (ASTER, or Advanced Spaceborne Thermal Emission and Reflection Radiometer, is an imaging instrument on the Terra satellite. Don’t look at the website if you are prone to getting distracted and wilfing [“what was I looking for”] while surfing!).

The integration of the data and systems with the 12+ years experience and lateral thinking of the technical team makes for a highly synergistic combination, which has been given further potency by the incentivisation of the team with rewards for discovery.

CAG claim that this has given it considerable competitive edge in sifting through large volumes of data; it has enabled the company to locate hot spots, fast-track target selection, assess potential and value, and benefit from considerable cost- and time savings compared to other more conventional approaches.

3. A portfolio of operations and projects comprising mines in Ghana and Zimbabwe, and exploration assets in Ghana, Zimbabwe, Mali and Botswana.

A third building block, of course, is CAG’s portfolio of projects.

CAG’s flagship project is currently the Bibiani gold mine in Ghana, which is located in the prolific Sefwi-Bibiani belt some 250 kilometres north-west of the capital Accra and which has produced a total of 4 million ounces of gold since 1902. CAG acquired the mine, the exploration rights and all the associated infrastructure (including a 225,000 tonnes per annum plant and $15 million investment in an underground mine) all for $40 million from Anglogold Ashanti [NYSE:AU], who had operated the mine as an open pit since 1997 but had decided to close and sell the mine in order to focus on other opportunities.

Since acquiring the mine, CAG has conducted 3,000 metres of a 15,000 metre drilling programme and a re-evaluation and modelling programme using all its technical methodologies. As a result it has announced a decision to start production from the tailings which will generate at least 40,000 ounces in the 2007 financial year and to invest $25 metres in developing an underground mine which will begin production later this year rising to an annualised rate of 110,000 ounces by the end of 2008 with a head grade of 3.6 grams per tonne, a recovery rate of 82% and a cash cost of around $300/oz. It also announced an increased increase in total gold measured and indicated reserves to 925,000 ounces.

The mine has a number of advantages, with highly prospective geology at depth and on strike, an excellent and established infrastructure, a highly skilled workforce of 300 on hand (with plans to increase this by 30%-40%), a warm reception from the local community, unions and government who have all welcomed the rejuvenation of the mine and the impact this will have on the local economy, the possibility of a rapid production build up and a relatively low risk since much about the mine and its metallurgy is already known.

CAG’s other producing assets are located in Zimbabwe following its acquisition in March 2007 of 85% of ZSE-listed Falcon Gold Zimbabwe Ltd (Falgold) and 100% of the privately-owned Olympus Gold Mines Ltd. Together the companies (which will be merged as Falgold) control five gold mining operations and a number of exploration properties. The companies produced 21,000 ounces of gold in FY2006 with an attributable net profit of around $700,000. Falgold will continue to be listed on the ZSE as CAG believes that the listing gives the people of Zimbabwe access to the company and a sector of their economy.

In Mali, which is Africa’s third largest gold region with some of lowest cost gold mines in the world, CAG has an 80% share in two JVs with a total of 23 exploration permits covering over 2,600 square kilometres. A drilling programme began in January 2007; some 215 holes totalling 8,400 metres have been drilled; assays and analysis are now in progress. Meanwhile in Botswana, CAG holds a 53% stake in Golden Tau Mining Ltd, an Australian based exploration company who have a permit which covers 872 square kilometres of the Kraapian greenstone belt.

Thus 2006/7, the first year of operation with the new management team, was a year of construction in which the building blocks - the teams, the technology and the exploration and production portfolios - were put in place Total attributable resources now stand at 3.6 million ounces while reserves are 876,000.

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