Caracal Gold PLC (LON:GCAT) Corporate Update, Q3 &Q4 2022 Operations Summary

Caracal Gold plc, the East African gold producer with over 1,300,000oz JORC-compliant gold resources, provides a corporate update and progress report on its operations and exploration activities for the quarters ended 30 September 2022 (‘Q3 2022’) and 31 December 2022 (‘Q4 2022’); specifically, the Company’s Kilimapesa Gold Mine and Processing Operation in Kenya (‘Kilimapesa’ or the ‘Project’), and the high grade, shallow gold Nyakafuru Gold Project in Tanzania.

Corporate Update

Financing

With regards to its financing arrangements, the Company announced on 10 January 2023 that OCIM Metals and Mining SA (‘OCIM’) would not be proceeding with its previously announced funding. This was announced immediately upon written confirmation from OCIM. As a result of this, Philoro Global Trading AG (‘Philoro’) did not advance the funding by 31 December 2022 as was expected (see RNS dated 12 December 2022). Philoro requested revised operational and financial plans which took into consideration this change. This work has been completed and presented to Philoro. The Company has been informed that Philoro remains committed to the financing and is working with the Company, existing shareholders, and other institutions in agreeing a financing package to replace the previous funding. The various parties involved are making good progress on securing the required funding and will update the market as soon as is appropriate.

Regulatory Disclosure

On 22 June 2022, the Company entered a debt finance arrangement for a total value of $1,500,000 with Mill End Ltd (“Mill End”), the details of which are below (the “Mill End Financing”).

Mill End Financing Key Terms:

• Signature Date: 22 June 2022.

• Principal Amount: $1,500,000.

• The total amount payable under the Mill End Financing was to be dependent on how quickly the Company was able to repay the Mill End Financing:

 First repayment milestone: 90 days after Signature Date (20 September 2022), 120% of the Principal Amount ($1,800,000)

 Second repayment milestone: 91-120 days after Signature Date (between 21 Sept 2022 and 20 October 2022) 126.667% of Principal Amount ($1,900,000)

 Third repayment milestone 121 to 150 days after Signature Date (between 21 October and 19 November 2022) 133.333% of Principal Amount ($2,000,000)

• Post the 150 days Mill End has the right to convert into new ordinary shares at 80% of the VWAP of the Caracal ordinary shares on the business day prior to the conversion request.

• Mill End has been granted warrants to subscribe for ordinary shares, exercisable for three years from the date of signature, at an exercise price of 0.8 pence. The number of shares will be calculated by dividing $500,000, converted into pounds sterling at a rate agreed between the parties or the spot exchange rate, by 0.8 pence.

• As part of the transaction, Robert McCrae and Gerard Kisbey Green who are directors of the Company, entered into Director’s undertakings whereby security over 98,500,000 and 55,300,000 ordinary shares respectively in the Company was granted in favour of Mill End. Robert McCrae and Gerard Kisbey Green remain the beneficial owners of the shares through Mansa Capital Ltd and Theseus Enterprises Ltd respectively, and retain full voting rights. 

These funds were due to be paid back from the proceeds of the recent financings. However, with the long delays and subsequent withdrawal of OCIM from the previously anticipated financing, it has been necessary to renegotiate the terms of the Mill End Financing. The renegotiated terms of the Mill End Financing were to contain an equity element in Mill Hill’s favour. However, the Company was unable to issue Mill Hill with shares which would be admitted to trading due to the limitation placed upon it of issuing 20% of shares of the same class over a 12-month period without a prospectus, the Company having already issued or agreed to issue a material number of shares in the period.

Therefore, to allow the renegotiation to proceed, the following has taken place. Mr Robert McCrae borrowed 17,208,742 shares from a shareholder of the Company. The borrowed shares were transferred to Mill End. Mr McCrae has agreed to repay the shareholder 17,208,742 shares plus an extra 1,720,874 shares, being an additional 10% at a future date to be agreed. Therefore, at the date of this announcement Mr McCrae owns 98,500,000 shares, of which 18,929,616 are to be transferred to the lender at a future mutually agreeable date.

Additionally, it has been requested that Mr McCrae transfer 25,000,000 shares to Mill End. It is anticipated this transfer will occur shortly and the Company will repay Mr McCrae for these shares.

The Company and Mill End are in the process of discussing an amendment to the transaction to address all above issues.

The Board believe this action was taken in the best interests of the Company and its shareholders and that the Directors undertakings given by Robbie McCrae and Gerard Kisbey-Green indicate their confidence in the operations and the ability to raise the required financing.

Board Composition

The Company hopes to appoint Mr. Simon Grant Rennick as Executive Chairman, subject to certain final commercial negotiations and legal formalities.

Mr Grant Rennick is a graduate of the Cambourne School of Mines. His expertise encompasses not only mining and minerals but also metals, agriculture, and property. He has managed mining companies, both public and private, in Uganda, Malawi, Kenya, Mexico and Botswana; metal trading businesses in Bermuda and in the UK; was a co-founder of Industrial Mineral Finance House which provides consultancy services covering all aspects of the industrial minerals’ sector; and established a property development business (since sold).

The Company hopes to announce his formal appointment in due course. In the meantime, Mr Grant Rennick has agreed attend board meetings and provide other services to the Company as “Chairman Designate”. 

Corporate Governance

Due to identified shortcomings, the Board has asked the Chairman Designate to initiate a comprehensive review of its corporate governance, regulatory compliance and communications policies in order to strengthen internal procedures.  This is expected to be a wide-ranging review and will include a review of the board structure, including the mix of executives and non-executives, and any requirements for different skill sets to ensure a robust and efficacious board structure.  Furthermore, a review of all corporate governance-related matters, practices and policies and a review of all board sub-committees, will be conducted.

The Board has decided that the Company’s financial advisor, VSA, as well as an independent firm of solicitors, will be consulted to assist the Chairman Designate in this review and the Board expects all the above to be concluded as soon as practically possible, but in Q1 2023.

Q3 & Q4 2022 OPERATIONS SUMMARY

HIGHLIGHTS

· Ongoing work to build production at flagship Kilimapesa Gold Mine:

 Continue to optimize mine plan and renewed focus on process efficiencies.

 Realised a total 806 ounces in gold sales in Q3 and 835 ounces in Q4.

 Reviewed the exploration programmes to further strengthen the current Mineral Resource Estimate (‘MRE’):

§ To date, 104 RC holes accounting for 10,444m and 21 DD holes accounting for 3,660.m have been drilled at Kilimapesa Hill, Maghor and Vim Rutha.

§ In Q4, seven trenches completed for a meterage total of 420m; five at Kilimapesa West Hill, two in Vim Rutha.

· Due to the delay in funding, activities around the expansion and operations have slowed down pending receipt of funds.

· Excellent progress at Nyakafuru Gold Project in Tanzania:

 Completed Phase 1 exploration project on schedule and on time; and

 Commencing 2nd phase drill programme to validate both historical drill results and new interpretation and collect metallurgical samples.

Robbie McCrae, CEO of Caracal, said,

“The Company welcomes the appointment of Mr Simon Grant Rennick as Chairman Designate and looks forward to him taking on the role of Executive Chairman. Simon’s extensive experience in exploration and mining projects in Africa as well as his experience as Chairman of various listed companies will strengthen the Board significantly.  Furthermore, I look forward to his leadership in conducting the various internal reviews in progress.

“Q3 and Q4 saw Caracal advance several work programmes at its flagship asset, the Kilimapesa Gold Mine in Kenya, where we are focused on increasing both mining and processing capacity to lift production to 24koz Au per annum.  While the delay in funding has slowed activities, in addition to the development of the mine plan and ongoing work at the new processing plant, we are also analysing results from regional exploration programmes to grow our resources and further strengthen the project’s economics. 

“The Nyakafuru Gold Project in Tanzania, which has proven high-grade, shallow gold resources amenable to conventional open pit with the potential to produce 50,000oz per annum, is equally exciting.  Having completed the acquisition, we are delighted to be progressing targeted drilling programmes to validate historic positive drill results and expand the current JORC-Compliant resource of 658,751oz at 2.08g/t.

“Our timing to build production/sales could not be better given the strong gold price, which market commentators think will continue to gain traction into 2023; indeed, the Bank of America Securities suggests that gold prices could top $2,000 oz up from a current eight month high of $1,876 oz.  We look forward to updating shareholders further on our progress.”

DETAILS

KENYA

Operations

 

Q1-22

Q2-22

Q3-22

Q4-22

Mined tons

44,846

42,233

64,639

35,989

Treated Tons

54,121

58,722

53,709

19,613

Smelted ounces Au

1,266

746

806

835

Stockpile tons

22,744 @ 1,72g/t

22,757 @ 1,68g/t

18,757 @ 1.72g/t

7,715 @ 1.47g/t

 · In Q3, the plant processed a total of 23,790t at an average grade of 1.61g/t through the CIL circuit and a further 29,919t at an average grade of 0.99g/t through the heap leach circuit to realise a total of 806 ounces in gold sales.

· In Q4, the plant processed a total of 19, 613t at an average grade of 1.80g/t through the CIL circuit and a further 6,859t at an average grade of 0.86g/t through the heap leach circuit to realise a total of 835 ounces in gold sales.

· Plant 2 was stopped on 1 August 2022 as the project of washing fines in the circuit proved to be uneconomic. Major factors were the low tons washed to the CIL and the insignificant upgrading of the fines.

· The heap leach pads reach design capacity and therefore Plant 3 was stopped in December 2022.

· Gold figures accountability (ratio of sold to produced) increased to 99% in September from an average of 50% for July and August. This was attributed to the installations of weightometers in the plant and the flowmeter in the Plant 3 CIS circuit, standardisation of sampling and sample handling procedures and the increase in Quality Control checks in the new laboratory. Gold figure accountability has subsequently remained stable at these rates.

· Tailings Storage Facility construction and monitoring ongoing and according to schedule.

 Exploration

· Latest results from drilling on Kilimapesa Hill confirmed the lateral and depth extensions as targeted on Kilimapesa Hill.

· Completed a total of 10 DD holes and 22 RC holes on Vim Rutha prospect, which extends more than 4km into the exploration licence and is located a few hundred metres south of Kilimapesa Hill, for a total respectively of 1,620.9m and 1,943m.

· DD drilling confirmed the existence of a mineralised structure over 1.5km parallel to the Kilimapesa Hill deposit while samples from the RC drilling are currently being analysed.

· A systematic trenching campaign commenced in Q3 to define the surface expression of the Vim Rutha mineralisation and samples are being analysed.

· During Q4, a total of seven trenches were completed for a meterage of 420m. Five trenches at the Kilimapesa West Hill prospect and two in Vim Rutha prospect. These trenches were positioned to determine both the strike and the extent of mineralisation on Kilimapesa West Hill and Vim Rutha prospects.

· Continued underground DD with a total of 33.32m being drilled in two boreholes in Adit D.

· To date, 104 RC holes accounting for 10,444m and 21 DD holes accounting for 3,660.m have been drilled at Kilimapesa Hill, Maghor and Vim Rutha.

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 Safety, Health, and Environment

· Continued focus on environmental plans with targets hit, annual audit conducted, and environmental licence obtained in relation to exploratory drilling, open-pit mining, and heap leach.

· Open Pit and Exploration Environmental Impact Assessment submitted to NEMA in Q4.

· All statutory audits, including Fire Safety, Occupational Safety and Health, and Environmental, up to date as of 31 December 2022.

· Ongoing support of employees with various training programmes completed and underway.

· One significant accident in Q3 – the employee received immediate care, is fully recuperated, and has resumed work.

TANZANIA – NYAKAFURU GOLD PROJECT

· Completed the Phase 1 exploration project on schedule and on time – the final report including conclusions is being finalised.

· Completed several fieldwork programmes including structural analysis of Voyager and Mentelle and planning of location of drill holes for the 2nd phase drill programme.

· Completed additional working including the upgrading of the Nyakafuru camp, reviewing of potential in the licences and extensions and advanced drill tender process. 

 **ENDS**

For further information visit www.caracalgold.com or contact the following:

Caracal Gold plc

Robbie McCrae

[email protected]


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