Caracal Gold PLC (LSE:GCAT) has released a corporate and operational update in relation to its activities in Kenya and Tanzania, and following the passing of all resolutions at its AGM on Monday 24 January 2023.
Caracal has over 1.3mln ounces of JORC-compliant gold resources in place and is focused on two projects, the Kilimapesa gold mine in Kenya, and the high-grade, shallow gold Nyakafuru gold project in Tanzania.
The company announced on 10 January 2023 that OCIM Metals and Mining SA would not be proceeding with its previously announced funding. As a result of this, Philoro Global Trading AG did not advance the funding by 31 December 2022 as was expected. Philoro requested revised operational and financial plans which took into consideration this change. This work has been completed and presented to Philoro.
Caracal 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.
On 22 June 2022, Caracal entered a debt finance arrangement for a total value of US$1.5mln with Mill End Ltd. The total amount payable under the Mill End Financing was to be dependent on how quickly the company was able to repay it.
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 component, but the company was unable to issue shares as headroom was lacking.
Therefore, to allow the renegotiation to proceed, chief executive Robert McCrae borrowed 17,208,742 shares from a shareholder of the company. The borrowed shares were transferred to Mill End.
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 upon.
Additionally, it has been requested that McCrae transfer 25,000,000 shares to Mill End. It is anticipated this transfer will occur shortly and the company will repay McCrae for these shares.
Meanwhile, the company hopes to appoint Simon Grant Rennick as executive chairman, subject to certain final commercial negotiations and legal formalities. 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, as well as metal trading businesses in Bermuda and in the UK.
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.
Operationally, the company continues to build production at the flagship Kilimapesa gold mine, and realised a total of 806 ounces in gold sales in the third quarter and 835 ounces in the fourth quarter. Drilling and other exploration work is also ongoing.
"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,” said McCrae in a statement. “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," he added, "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 24,000 ounces of gold 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.”
McCrae also highlighted the potential of Nyakafuru: "The Nyakafuru gold project in Tanzania, which has proven high-grade, shallow gold resources amenable to conventional open pit with the potential to produce 50,000 ounces 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 658,751 ounces at 2.08 grams per tonne."