Cluff Gold PLC
AIM : CLF
TSX : CFG

Cluff Gold PLC

May 17, 2011 09:30 ET

Cluff Gold Plc: Preliminary Results for the Year Ended 31 December 2010

LONDON, UNITED KINGDOM--(Marketwire - May 17, 2011) - Cluff Gold ("Cluff Gold" or the "Company") (AIM:CLF)(TSX:CFG), the dual AIM/TSX listed West African focused gold mining company, announces its preliminary results for the year ended 31 December 2010.

Highlights:

  • Total Production: 94,295 ounces
  • Average Cash Cost achieved: US$883 per ounce
  • Average price of gold sold: US$1,228 per ounce
  • EBITDA growth of US$18.4m to US$22.6m driven by the increased production and strong gold price
  • Operating cash flow increased by 38% to US$32.2m attributable to both improved operating efficiencies and an increased gold price, providing funds for additional capital expenditure and the repayment of debt
  • Closing net cash of US$20.9m compared to net debt of US$3.6m for 2009, providing a stable base for increased exploration activity in 2011

Baomahun, Sierra Leone:

  • Increase in measured and indicated resource of 27% announced in June 2010 to 1,420,000 ounces grading 2.9 g/t, with an additional 1,030,000 ounces grading 2.6 g/t of inferred resources
  • Preliminary Assessment completed in June 2010 indicating that the current defined resources can sustain a mine generating 157,000 ounces per annum over an 8 year initial mine life
  • Seven new high-priority targets identified in a VTEM geophysical survey over an additional 134 sq. km of licence area
  • 15,000 metres of infill drilling completed since resource update announced in June 2010
  • Definitive feasibility study due for completion in Q3 2011
  • Additional cost optimisation studies being conducted in parallel to the feasibility study

Kalsaka, Burkina Faso:

  • 74,073 ounces produced in 2010, a 36% increase
  • Strong production driven by a 36% increase in ore stacked in 2010 to 1.55 Mt at an average grade of 1.6g/t
  • Average cash cost achieved of US$793 per ounce, a slight increase on 2009 due to lower grades in H2 2010
  • Focus on exploration for 2011 to increase resource base
  • 12,000m of reverse circulation drilling completed in H2 2010 has helped define an expanded 63,000m drilling programme for 2011

Angovia, Côte d'Ivoire:

  • Ore processed has increased 10% to 822,921 tonnes assisted by improvements to the processing plant
  • 20,222 ounces gold produced (2009: 21,632 ounces) despite the political turmoil in Côte d'Ivoire during Q4 2010
  • Operation put on care and maintenance in Q1 2011 due to ongoing political disruptions
  • Renewed focus on the exploration potential at Angovia: a 31,000m RC and RAB drilling programme is scheduled to commence once drill rigs are available
  • Initial drilling will focus on four Lateritic targets, similar to Blangan, where surface geochemical anomalies have been identified
  • RC drilling to focus on significant sulphide potential

Peter Spivey, Chief Executive Officer of Cluff Gold, commented:

"I am pleased with the Company's financial position going into 2011. Our strong cash position, coupled with our ongoing operational cash generation, allows the Company to fund the expansion of our exploration activities in 2011. The Company's asset quality and exploration programme place the Company on a strong growth platform going forward.

I look forward to a year of continued growth and exploration, targeting the further enhancement of our current production platform."

Chairman's Statement

Since my last report I have stepped down as Chief Executive in favour of Peter Spivey. This was effective from January 1st this year and followed after Peter Spivey had served as Chief Operating Officer of the Company for over a year. Apart from now being thoroughly familiar with every aspect of our business, he is based in West Africa which is where your board believes the Chief Executive needs to be. I remain as Chairman based in London.

One of the governing reasons which supported Mr Spivey's welcome decision to join this Company was his belief in the potential of the Baomahun project in Sierra Leone. He is now charged with the task of superintending the transition of this gold deposit into a producing mine and his experience and leadership will be absolutely fundamental to attaining that objective. One of the crucial demands which a development of this scale makes is for additional management and Peter Spivey and Pete Gardner, our Finance Director, are augmenting their respective teams.

Your Company has a clear goal of achieving production of 250,000 to 300,000 ounces per year. It is our intention that Cluff will attain this target as an independent entity through the development of its flagship Baomahun project. This goal will move closer to reality following the completion of the Baomahun feasibility study later this year.

Whilst our undoubted priority is the development of Baomahun, we remain committed to our exploration remit which now encompasses licences in Mali, Burkina Faso and Côte d'Ivoire in addition to Sierra Leone. We operate the Kalsaka mine and have a vigorous programme of drilling there with a view to extending the life of this mine. We have further exploration licences, awarded to us in 2010, in Burkina Faso and our exploration team has begun the exploratory process on those licences.

Possibly our most prospective exploration ground is at Angovia in Côte d'Ivoire. As I write, the small mine at Angovia – which produced gold from an oxide deposit – is on care and maintenance following the interruption of supplies resulting from the recent unrest in that country. However, there exists an underlying sulphide deposit at Angovia, which is presently estimated to contain an initial measured and indicated resource of 292,000 ounces (169,000 ounces measured at 1.5g/t Au and 123,000 ounces indicated at 1.7g/t Au). We believe that the sulphide potential at Angovia is significant, and are planning a major exploration programme with a view to developing a more substantial mine should results warrant. The location of a major hydro-electric plant within five kilometres of Angovia provides the added benefit of low power costs should a mine be developed.

As a result of our high level of exploration activity and expenditure, the Chief Executive is looking to establish a larger geology department to ensure the Company capitalises on the momentum gained in 2010.

There is no gainsaying that large parts of the African Continent are currently in a condition which renders cogent analysis both difficult and dangerous. On the one hand, West Africa remains geologically speaking one of the most prospective areas in the world. This is complemented by Governments which, in the main, are well aware of and responsive to the importance of foreign investment and which conduct their affairs within the framework of English or French law. On the other hand the scourge of inflation, particularly food price inflation, and the evidence of the possibility of regime change being a solution has taken hold amongst the population of various countries. We had direct experience of this recently in Côte d'Ivoire although the situation there is now improving. There have also been disturbances in Burkina Faso although our operations have not been affected. But the atmosphere in the Middle East and larger parts of Africa remains febrile. My colleagues and I feel that we must be alert to extending our activities to other countries in the region and we are examining various possibilities now. We also take heart from our collective experience of working in Africa for many years – although every situation is unique, there is no substitute for knowledge and familiarity in this type of environment.

To end on a positive note, notwithstanding the recent volatility, the price of gold has continued to strengthen since my last report, and my view is that a robust price environment will remain for the foreseeable future. With high levels of both personal and public debt throughout the developed world, inflation is in fact the only clear path to a reduction in absolute terms. Governments around the world are acting to maintain the supply of money, creating a fertile environment for the price of all commodities, not least gold. This will not only be reflected in our cash flow but will strengthen the underlying value of our business.

J.G. Cluff, Chairman

16 May 2011

Chief Executive's Statement

It is a pleasure to present this, my first report, as Chief Executive of Cluff Gold plc. Although the period presented pre-dates my elevation to Chief Executive, I believe it is important that this report clearly sets out our strategy for the successful development of our assets, which is very much my main area of focus.

The original decision to join Cluff Gold was an easy one, due to my belief in the strength of the Company's assets. In particular, I believe that the Baomahun project has the potential to be world class, and I was drawn to the parallels in respect of its stage of development with other projects on which I have worked, the experience from which will help bring it to profitable fruition.

The evolution from an explorer to a developer can be difficult for many companies. The skills required to manage a successful exploration project are often quite different from those required for successful development. During the exploration stage, strategy is dependent on not only the last set of results, but also the next. The ability to quickly evolve plans in light of recent data is the most important of all. By comparison, once an ore body is defined, the key to successful development is putting in place the correct systems and procedures to manage the operation in an efficient and orderly manner.

When I first arrived at Cluff Gold, a number of the management systems used at the Company's two operating mines were relatively under-developed. As Chief Operating Officer my first task was to ensure that these systems evolved quickly to improve operational efficiency. One such example was supply chain and inventory management. A new management system has been put in place at both the Kalsaka and Angovia mines to ensure that critical spare parts are always available, and regular consumables are purchased from the most appropriate supplier at the right time. It is these day-to-day operating systems that make the difference between an efficient, profitable mine, and one that struggles to maintain production.

In terms of the Company's development to a mid-tier producer we are now at a pivotal time. The completion of the definitive Baomahun feasibility study due in Q3 2011 is only the first step in the value realisation from that project. We are now starting to focus on building the team that can help develop an efficient and profitable mine. Whilst resources are central to the value creation from a project, the importance of having the right team in place from the outset cannot be underestimated.

In terms of our broader strategy, I must stress the importance of exploration. Due to our strengthened balance sheet we now have the funds to allow our resource base to grow across all assets. As an unhedged producer of over 70,000 ounces per annum in Burkina Faso, given the current gold price environment, we will also generate cashflow during 2011 to continue to meet these goals. We are therefore working to strengthen our exploration teams to ensure that we have the right personnel in place to deliver on the potential of all our assets.

In my opinion Cluff Gold has an almost unique position. As a producing gold miner we are very different to earlier stage exploration companies: not only do we generate the funds internally for our exploration programmes, we also have personnel across the Group who understand only too well what is required to successfully run a producing gold mine – and who understand the difficulties in developing a mine. By comparison, what sets us apart from other producing companies is the enormous potential for growth at all of our assets.

Our strategy is a simple one:

  • At Baomahun, we aim to build a mine producing in excess of 150,000 ounces of gold per annum, with a view to an early expansion should exploration results along strike warrant. We are also reviewing a number of cost optimisation strategies that could deliver a significant cost benefit.
  • At Kalsaka, we aim to extend the oxide life of the existing heap leach operation whilst exploring the deeper sulphide potential.
  • At Angovia, we aim to focus primarily on the sulphide potential, adding to the resources delineated to date.

Together with our new exploration properties in Burkina Faso and Mali, I remain convinced that the Company has the asset base required to develop into a mid-tier producer. I look forward to reporting on our progress against these goals in the future.

Peter Spivey, Chief Executive Officer

16 May 2011

Review of Operations

Baomahun

Baomahun is Cluff Gold's defining development project. The Company's focus at Baomahun is two-fold: to advance the project to production with the current resources and to increase the project's resource base by delineating additional mineralisation along the 12km prospective strike.

The Company made tremendous progress at Baomahun in 2010:

  • In June, the Company announced a 27% resource increase to 1,420,000 ounces in the measured and indicated categories (510,000 ounces measured at 2.9g/t Au and 910,000 ounces indicated at 2.9g/t Au) and an additional 1,030,000 ounces (at 2.6g/t Au) in the inferred category(1).
  • A Preliminary Assessment was completed in June for the immediate resource area with positive results, demonstrating robust economics for an operating mine based on the currently defined resources. Production at Baomahun is expected to commence in mid-2013, contributing 157,000 ounces per annum to the Group at an estimated cash cost of US$500/oz.
  • The results of a geophysical VTEM (Versatile Time-Domain Electromagnetic) survey were announced in December 2010, identifying seven new high priority drill targets along strike – expanding our exploration focus to the remainder of the 136 sq. km licence area. Up to five drill rigs will be operating on site in 2011 focused on these targets.
Baomahun ResourcesTonnesGradeGold Content
Using 1.0g/t Au cut-off(millions)(g/t Au)(Ounces)
Measured5.52.9510,000
Indicated9.62.9910,000
Inferred12.22.61,030,000
Baomahun preliminary assessment results –
August 2010
Mtg/t AuMoz
Mineable OP Tonnage(Mt)12.02.71.0
Mineable UG Tonnage(Mt)2.54.30.3
Total Mineable Tonnage (OP + UG)(Mt)14.42.91.4
Metallurgical Recovery(%)92%
Steady State Throughput (OP + UG)(Mtpa)1.9
Annual Production(Koz)157
Total Cash Cost(US$/oz)$500
Mine Life(Years)8
Capex(US$M)$195
NPV (10%)(US$M)$172
IRR(%)31%

Progress in line with our strategy continues in 2011. Definitive feasibility study work is progressing, with completion targeted for Q3 2011. The infill drilling programme has now been completed, with all major components including environmental and social studies, engineering plans and mine infrastructure planning well underway.

Over 15,000 metres of infill drilling have been completed since the resource update in June 2010. The extensive drilling has established greater continuity in the mineralisation than previously modelled. Notable drill results include(2):

  • 16m at 7.1g/t Au from 346m, including 10 m at 10.2g/t Au from 347m
  • 19m at 5.7g/t Au from 611m, including 10 m at 6.9g/t Au from 612m
  • 22m at 4.2g/t Au from 332m, including 11m at 7.0g/t Au from 335m
  • 13m at 5.4g/t Au from 421m, including 3m at 18.7g/t Au from 429m
  • 12m at 8.2g/t Au from 48m, including 5m at 12.8g/t Au from 50m

A new resource block model is currently being developed, which is expected to be announced during Q2 2011 for inclusion in the feasibility study.

A lower-risk open-pit only mining method is being adopted for the feasibility study, compared to the combined open pit and underground mining schedule set out in the Preliminary Assessment.

Additional cost optimisation studies are also being carried out in parallel to the feasibility study with a view to achieving the best possible economics. Principally these are:

  • Ongoing metallurgical test work suggests that a processing route incorporating a flotation stage may be more economically viable. This could replace the CIP/CIL circuit envisaged in the Preliminary Assessment and, if successful, would result in a significant reduction in capital and operating costs. Not only would flotation enable recovery with a much coarser grind, reducing capital and operating expenditure on the grinding circuit, it would also remove the capital cost of large tanks and the high power associated with agitation that is required for a conventional CIP/CIL process.

    Following successful initial results, variability test work incorporating flotation and a gravity separation circuit is ongoing, with final results expected to be available in Q3 2011. Whilst the feasibility study will be based on the conventional CIP/CIL process, if the results of the variability test work are positive the detailed processing plant design will be updated in Q4 2011 to incorporate flotation.
  • The topographical relief and rainfall pattern of the region enables the provision of hydro-electric power ("HEP") without the need for dam construction or land inundation. A feasibility study into the establishment of an HEP station has been commissioned, with 12-month river flow gauging due to be completed in July 2011. Results to date suggest that a 20MW run-of-river HEP plant could provide 72% annual power availability, which would significantly reduce operating cash costs at current fuel prices compared to the heavy fuel oil power option currently modelled.

The HEP feasibility study is expected to be completed in Q4 2011, with the HEP project separately financed from the mine. The heavy fuel oil power plant envisaged in the feasibility study will be required regardless of the results of the HEP feasibility study due to the seasonality of river flow and the power requirements at the height of the dry season. The construction of the heavy fuel oil power plant will also ensure that the HEP project will not delay commencement of mine development.

Significant additional exploration potential

With the current resource contained in only 2 sq. km of the 136 sq. km project area, the Company is excited by the significant exploration potential along strike to the north at Baomahun. The second branch of the Company's two-fold strategy at Baomahun is to realise the resource potential along the 12-km Archaean-age banded iron formation (BIF) strike, with a view to increasing the project's total resource base.

Prior to 2010 very little focus had been given to the wider potential of the Baomahun area, but an airborne VTEM Survey for the Baomahun licence area was undertaken in Q2 2010, with the final interpretation announced in December 2010(3). Using data from the VTEM Survey correlated with known lithologies, magnetic anomalies and geochemical surface data, seven new drill targets were identified. All are interpreted as occurring close to surface with strikes and dips similar to mineralisation in the existing resource area.

Over 1,000 metres of trenching has been carried out over the targets identified, with initial assay results expected in Q2 2011. An initial 12,000 metres diamond drilling programme commenced in Q1 2011 to provide first pass drilling for all targets, with over 3,500 metres drilled to date. Drill core from the first holes includes sulphide mineralisation known to be associated with gold in the current resource area. The first assay results are expected in Q2 2011, which will demonstrate whether these sulphide minerals are also associated with gold in the new targets. Up to five drill rigs will be operating this year to complete the initial drilling programme and follow up on any promising mineralised areas identified.

Kalsaka

As the Company's predominant cash generator, Kalsaka delivered exceptional performance in 2010 by exceeding the Company's 70,000 ounces production guidance and generating EBITDA of US$29.1m to fund the Group's activities.

Kalsaka Production Statistics

20102009Difference
Ore mined(t)1,539,5571,296,903242,65419%
Waste mined(t)11,135,9339,303,2431,832,69020%
Ore processed(t)1,550,3731,135,913414,46036%
Average ore head grade(g/t)1.61.7(0.1)(8%)
Gold production(oz)74,07354,42819,64536%
Cash costs excl. Royalties(US$/oz)793767263%
Average realised gold price(US$/oz)1,2211,01820320%

A total of 74,073 ounces of fine gold was smelted at Kalsaka in 2010, representing a 36% increase on 2009. This strong performance was driven by the increase in plant capacity from 1.2Mtpa to 1.6Mtpa, completed in Q4 2009.

A total of 1.55Mt was stacked in 2010, a 36% increase on 2009, representing 97% of the stacking capacity for the year. This was matched by a strong mining performance, with a total of 12.7Mt of ore and waste moved, a 20% increase on 2009. The stripping ratio of waste to ore, at 7:1, was in line with that encountered in 2009. The average grade of ore processed fell 8% in 2010, from 1.7g/t Au to 1.6g/t Au, as lower grade areas of the project were accessed, particularly in the second half.

The total gold production in H2 2010 was significantly below that achieved in H1 2010 solely due to the geology of the ore body. H1 production, at 40,800 ounces, was significantly ahead of the forecast annual production rate of 70,000 ounces as high grade ore, averaging 1.8g/t Au, was processed. As anticipated, grades fell in the second half, averaging 1.3g/t Au, with a corresponding impact on gold production. Due to the nature of heap leach operations, with the leach cycle for processed ore lasting up to four months, the impact of the lower grade ore is not exactly matched in the production profile.

Kalsaka Production Statistics

Q1 2010Q2 2010Q3 2010Q4 2010Q1 2011
Ore mined(t)372,147406,790332,842427,778466,629
Waste mined(t)2,283,3922,706,3272,845,7623,300,4523,549,933
Ore processed(t)419,512370,318321,325439,218452,631
Average ore head grade(g/t)1.81.81.41.31.4
Gold production(oz)21,48119,35015,80417,43816,837

Production in Q1 2011 continues to focus on lower grade areas, as originally modelled, with an average processed grade of 1.4g/t Au. Whilst below the run rate for the 70,000 ounces annual production guidance, production in Q1 2011 is above budget. Grades are predicted to strengthen further through the remainder of 2011, increasing production rates and enabling the Company to achieve the full year production guidance provided.

Cash costs in 2010, at US$793 per ounce, are 3% higher than achieved in 2009. This is due to the lower grades off-setting the increase in productivity. Cash costs are also impacted by the waste to ore ratio, which, along with the falling grade, increased the cash costs in H2 2010 to US$942 per ounce compared to US$672 per ounce realised in H1. The higher stripping ratio was caused in part by new areas opened up for mining in H2, with high waste to ore ratios near surface.

Costs were also impacted by inflation. Mining costs per tonne rose by 17% in 2010 compared to 2009, whilst processing costs per tonne fell by 15% due to the economies of scale realised. Fortunately, this impact is more than off-set by the increase in the gold price in 2010, with the average sale price realised at Kalsaka increasing 20% to US$1,221 per ounce. At this average price, the Kalsaka mine generates good cash margins despite the relatively high cash costs. The strengthening gold price has continued into Q1 2011, with an average realised gold price for the period of US$1,396 per ounce, further enhancing operating cash flow from the mine for investment in exploration across the Group.

Exploration

Exploration and reserve development is a primary focus at Kalsaka. As the Group strengthened its balance sheet in 2010 and project development and expansion activities were achieved, there has been a renewed focus on exploration activity.

As at 31 December 2010

TonnageGrade
(g/t Au)
Ounces
Resources at 0.5g/t Au cut off
Oxide & TransitionalMeasured2,334,0001.7126,000
Indicated4,481,0001.5212,000
Measured & Indicated6,815,0001.5338,000
Inferred1,019,0001.344,000
SulphideMeasured153,0001.68,000
Indicated1,011,0001.755,000
Measured & Indicated1,164,0001.763,000
Inferred2,311,0001.5113,000
Reserves at 0.5g/t Au cut off
and US$950/oz gold price
Oxide & TransitionalProven1,497,0001.887,000
Probable1,941,0001.699,000
Proven & Probable3,440,0001.7186,000

All available exploration data was analysed in H1 2010 and the Kalsaka exploration goals were defined as:

  • To increase the current life of the mine through the delineation of additional oxide resources.
  • To aggressively follow up the strong evidence of the potential for a larger sulphide resource beneath the known oxide resources.

An exploration programme commenced in H2 initially focused on trenching, geophysics and soil sampling together with a total of 12,000 metres of reverse circulation drilling. The results from this programme have helped define an expanded 63,000 metre drilling programme for 2011.

Oxide targets include the Zoungwa prospect along strike from the existing K-zone pit as well as mineralised splays between the K-Zone and Goungre Shears. Drilling results announced in November 2010 included intercepts of 16 metres grading 1.82g/t Au and 7 metres grading 2.36g/t Au in the oxide zone at Zoungwa(4). Two drill rigs are currently on site and further drilling results are anticipated.

The ongoing drilling programme has also provided evidence of significant sulphide mineralisation underlying the K-Zone and the East Pit, as demonstrated by an intercept of 15 metres grading 7.44g/t Au beneath the existing K-zone pit announced in October 2010(5).

The Company is highly encouraged by the results to date and believes that the remainder of the drilling programme will help to demonstrate the potential of the asset. A US$7m exploration budget has been allocated to Kalsaka for 2011.

In August 2010, the Company was also awarded four additional licences located in prospective Birimian ground in eastern Burkina Faso, demonstrating the strength of the Company's relationship with the Burkina Faso government. These licence areas have a similar geological setting to the Samira Gold Mine in Niger, which produces on average 60,400 ounces per annum(6). The licences were selected from a portfolio of available areas following a technical site visit. The areas demonstrate strong exploration potential evidenced by historical stream sediment survey results and gold-in-soil anomalies. An initial exploration budget totalling US$0.7m has been set aside in 2011 for regional work across these licences.

Angovia

Located in an area of highly prospective Birimian greenstone belt terrain in Côte d'Ivoire, the Angovia project represents an exciting exploration opportunity for the Group. The Company remains optimistic on the project's exploration potential with a long-term goal of developing a mine capable of exploiting sulphide resources.

The current oxide only heap leach operation produced 20,222 ounces in 2010, 7% below the 2009 total and significantly below the Company's expectations. The problems at Angovia included the impact of the deteriorating political environment towards the end of the year as well as operational challenges evident during H2 2010.

Angovia Production Statistics

20102009Difference
Ore mined(t)903,301880,53822,7633%
Waste mined(t)3,343,9235,233,896(1,889,973)(36%)
Ore processed(t)811,921738,83273,08910%
Average ore head grade(g/t)0.91.2(0.3)(23%)
Gold production(oz)20,22221,632(1,410)(7%)
Cash costs excl. royalties(US$/oz)12121113999%
Average realised gold price(US$/oz)1,2181,121979%

Total ore processed in 2010 increased by 10%, boosted by increased operating efficiencies including the acquisition of a new stacker, and an upgrade to the agglomeration drum. Ore mining volumes also improved year on year, helped by a significant reduction in the waste to ore stripping ratio following an effective catch up on waste in 2009.

The under-performance stemmed from the low grades processed in 2010, 23% lower than the average in 2009 and also below the average reserve grade. This is due to the nature of the Angovia ore body, where the majority of high grade ore is associated with hard quartz vein and transitional material, which cannot be processed without crushing. A crusher was brought on site in August 2010 to allow the processing of this material, but its commissioning was delayed by an unusually heavy and prolonged wet season followed by supply disruptions brought on by the political unrest.

While higher grade ore from Blangan, a lateritic deposit in the project area, boosted grades in H1 2010, average grades in H2 declined to 0.7g/t Au due to the expected higher grade material not being processed in significant volumes.

As a result of the low grades, operating cash costs for the year increased by 9% to US$1,212 per ounce (excluding royalties). The average gold price achieved also increased 9% to US$1,218 per ounce, with the result that the mine operated at an almost break even basis over the year (after royalties).

Angovia Production Statistics

Q1 2010Q2 2010Q3 2010Q4 2010Q1 2011 (1)
Ore mined(t)262,340223,662257,103160,196176,418
Waste mined(t)985,654721,479995,628641,162878,233
Ore processed(t)246,330174,105216,068175,418139,841
Average ore head grade(g/t)1.10.90.70.70.7
Gold production(oz)6,7084,5774,5674,3702,906
1. The operation was put on care and maintenance on 7 March 2011

Production in Q1 2011 again fell short of expectations primarily due to the political disruptions. The harder, high grade material, continued to be unavailable due to a lack of explosives for drill and blast activities. Disruptions to other consumables reduced stacking rates and the operation was eventually put on care and maintenance in March 2011 due to the impediments to operating in the country, including the closure of the banking system.

Once operations can resume at site, the initial focus will be to resume processing activities to recover gold from material in the existing stockpiles and leach pad. Exploration activities will resume with a view to delineating additional resources in laterite targets similar to the Blangan deposit – a high grade and low strip ratio deposit that contained approximately 24,000 ounces at 1.7g/t Au that was defined in Q3 2009 and mined between Q4 2009 and Q1 2010. Full mining operations will resume only once the directors are confident that these can be conducted safely and profitably.

Exploration

The long term future of the Angovia mine rests with the significant exploration potential in the project area. In the near term, the Company is focused on defining additional oxide targets, with a 31,000 metre RC and RAB drilling programme planned once a drill rig is available. Drilling will initially be focused on four lateritic targets similar to Blangan where surface geochemical anomalies have been identified.

More importantly, the Company believes that the project's true potential lies in its considerable sulphide mineralisation, as demonstrated by drill results of up to 30 metres at 3.64g/t Au below the current pit. To date, 292,000 ounces of sulphide resources (at 1.6g/t Au) have been delineated in the measured & indicated categories (169,000 ounces at 1.5g/t Au in measured and 123,000 ounces at 1.7g/t Au in indicated categories). Due to the relatively shallow depth of weathering at Angovia, together with the close availability of hydro-electric power, the Company considers that a conventional CIL processing plant could be developed at Angovia to fully exploit the resource base with a lower resource hurdle than at other locations.

As at 31 December 2010
TonnageGrade
(g/t Au)
Ounces
Resources at 0.5g/t Au cut off
Oxide & TransitionalMeasured3,291,0001.2128,000
Indicated1,289,0001.564,000
Measured & Indicated4,580,0001.3192,000
Inferred801,0001.538,000
SulphideMeasured3,421,0001.5169,000
Indicated2,195,0001.7123,000
Measured & Indicated5,616,0001.6292,000
Inferred506,0001.525,000
Reserves at 0.5g/t Au cut off and
US$1000/oz gold price(1)
Oxide & TransitionalProven1,600,0001.050,000
Probable500,0001.931,000
Proven & Probable2,100,0001.281,000
1. With the exception of Angovia 2, which was modelled on a US$1,000/oz pit shell and represents 41% of total reserves

Further drilling will also target Kongonza, where 75,100 ounces have been delineated in the measured & indicated categories to date (with 48,622 ounces at 1.25g/t Au in measured, and 26,478 ounces at 1.74g/t Au in indicated categories) with a further 12,792 ounces in the inferred category (at 1.47g/t Au) (included in the resource tables set out). A further 3,500 metres of RC drilling has been planned for this area to target continuity along strike and to test a sub-parallel corridor suggested by a recent structural interpretation.

Finance

Improved operational cash flow

The most important financial metric for the Company is the cash generated from operations. This funds the investment required to fulfil our strategy: to complete the Baomahun feasibility study; expand the resource base at Baomahun by exploring along strike; extend the life of Kalsaka mine through exploration; and explore at our other operations in Burkina Faso, Côte d'Ivoire and Mali.

The 2010 results demonstrate a significant improvement in cash generation, with the balance sheet position increasing from a net debt of US$3.6m to net cash of US$20.9m over the course of the year. This turnaround in cash generation was driven by both improved operating efficiencies and the strengthening gold price.

In 2009, our operations utilised US$8.8 million of cash, which together with US$5.2 million of capital expenditure more than fully expended the US$13.0 million raised from equity shareholders. Not only was this unsustainable, the nature of the cash flows was such that capital expenditure on both exploration and mine development was constrained.

In 2010 our operations have generated US$23.4 million of cash inflow, representing a US$32.2 million increase compared to 2009. This has more than funded US$12.0 million of capital expenditure and a US$6.0 million repayment of debt – the last of which will also save a further US$1.5 million of finance charges that were paid in 2010.

Accordingly, the US$15.6 million raised in 2010, at a premium to market, has allowed us to significantly increase our exploration programmes across the Group without jeopardising the funding required for the Baomahun feasibility study. Accordingly, a US$20 million budget has been allocated to exploration in 2011 over and above the US$12 million required for the Baomahun feasibility study.

Importantly, our US$20.9 million cash buffer at 31 December 2010 allows us to plan our exploration programmes on a longer term basis. As exploration results are the cornerstone for the future growth of the business, this change in our operating cash flow is extremely welcome.

Strong operational performance

Internal management reports focus on EBITDA, as set out in note 4 to the preliminary statement. This is an approximate measure of the cash generated from each business unit before changes in working capital, and is set out for both the current and prior years on a consistent basis excluding the impact of the commissioning phase of operations in 2009.

On this basis, the financial performance for the year is strong. Segmental turnover has increased by 49%, driven by a 25% increase in production and a near 20% increase in the average realised price of gold sold. At US$1,220 per ounce, the latter has shown significant improvement in Q1 2011, with a further 14% increase to US$1,395 per ounce.

EBITDA has increased by over 400%, or US$22.6 million in 2010 due to the increase in turnover far outstripping the increase in costs. Overall, cash costs per ounce increased by 2% in 2010 compared to 2009. Average cash costs will be reduced in 2011 due to the temporary suspension of production at Angovia, and further efforts are being made to contain cash costs at Kalsaka. A fuller discussion of cash costs at each site is set out within the operational analysis presented previously.

The financial performance at Kalsaka has been particularly pleasing, with a 68% increase in turnover and 170% increase in EBITDA to US$29.1 million for the operation in 2010. This supports our assertion that the current Kalsaka mine is fulfilling its remit for the Group's overall strategy – to fund our exploration programmes to deliver growth across all assets.

The statutory income statement continues to show an overall loss for 2010 of US$0.05 per share. This can be expected as the Group is dominated by Baomahun, a pre-production asset. Although direct costs associated with Baomahun are presently capitalised, support costs, including the strengthening of the Group's management team in preparation for the development of Baomahun, are included in the income statement. Relatively short reserve lives also result in high levels of (non-cash) depreciation and amortisation, which further erodes reported earnings. As previously discussed these are being aggressively addressed through exploration efforts.

Building a strong asset base

By far the most important assets of the Group are its reserves and resources. These are not reflected on a financial balance sheet except as capitalised exploration and acquisition expenditures, and rightly so, as their true market valuation is exceptionally judgemental. The costs associated with the definition of our resources at Baomahun are included within intangible assets – at 31 December 2010 the cash costs capitalised averaged US$9.20 for each resource ounce defined across all categories.

One of the key metrics for comparing the valuation of resource companies often set out by analysts is enterprise value per resource ounce. As the majority of the Company's resources are at Baomahun, we look forward to the completion of the feasibility study in 2011, which we believe will assist the market in understanding the true value of these resources.

Capital expenditure in 2010 increased by 14% to US$12.5 million, although changes in the type of expenditure reflect a more important factor. In 2009, 52% related to investments at Kalsaka, including the mobilisation of a new mining fleet and upgrades to the plant required to put the operation on a surer footing. This type of expenditure dropped to US$2.6 million in 2010, primarily focused on additional leach pad space for mine life extension. At Baomahun, capital expenditure increased by 84% to US$6.2 million in 2010, 50% of the total capital expenditure in the year, reflecting increased activity at site as the project moves towards feasibility.

In respect of working capital, delays in the repayment of VAT in Burkina Faso and Côte d'Ivoire were highlighted as problems in 2009. In Burkina Faso, repayments have now commenced, with the total recoverable amount at 31 December 2010 reducing slightly compared to the prior year. Although repayments have not been received from Côte d'Ivoire, with the asset continuing to be treated as recoverable in more than one year, payments of VAT have now ceased under an updated mining convention, so the problem has been capped.

Finally, it is pleasing to note that the Company is debt free at 31 December 2010, with the US$6 million working capital facility from RMB Australia Holdings Limited fully repaid in 2010. Whilst there will be a significant financing requirement for the Baomahun mine development, the options open to the Company for this remain varied. With a strengthening balance sheet in 2011, together with our desire to increase resources across the Group, we aim to deliver this financing with the minimum dilution to existing shareholders.

This News Release includes certain "forward-looking information" within the meaning of applicable Canadian securities legislation. All statements other than statements of historical fact, included in this release, including, without limitation, the positioning of the Company for future success, statements regarding potential future production, exploration and drilling results at Angovia, Kalsaka and Baomahun, and future capital plans and objectives of Cluff Gold, are forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Cluff Gold's expectations include, among others, risks related to international operations, the actual results of current exploration and drilling activities, changes in project parameters as plans continue to be refined as well as future price of gold. Although Cluff Gold has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Cluff Gold does not undertake to update any forward-looking statements that are included herein, except in accordance with applicable securities laws.

In this New Release the term "cash operating cost" is used as a performance measure. Cash operating cost is used on a per ounce of gold basis. Cash operating cost per ounce is equivalent to mining operations expenses for the period divided by the number of ounces of gold sold during the period.

Andrew Asante, (M.Sc., AusIMM), Resource Manager for West Africa and a "qualified person" as such term is defined in National Instrument 43-101, has reviewed the technical contents of this announcement. Mr. Asante has verified the exploration data disclosed in this announcement, including sampling, analytical and test data underlying the information contained herein.

Cluff Gold plc is a "Designated Foreign Issuer" in accordance with National Instrument 71-102 – Continuous Disclosure and Other Exemptions Relating to Foreign Issuers ("NI 71-102") in Canada, subject to the foreign regulatory requirements of a foreign regulatory authority, namely, AIM Market of the London Stock Exchange.

For Baomahun, detailed geology and other exploration information can be found in the Company's report Technical Review of the Baomahun Gold Exploration Project, Sierra Leone dated 12 August 2010, made available on the Company's website and on SEDAR.

For Kalsaka, detailed geology, descriptions of the various exploration prospects at Kalsaka, and other exploration information can be found in the Company's NI43-101 report Technical Review of Kalsaka Gold Mine, Burkina Faso, as prepared by SRK Consulting, dated October 2008 and available on SEDAR. Resource estimation has been subsequently updated for production changes.

For Angovia, detailed geology, descriptions of Kongonza and other exploration prospects at Angovia, and other exploration information can be found in the Company's NI43-101 report Technical Review of Angovia Gold Mine, Mount Yaore, Côte d'Ivoire, as prepared by SRK Consulting, dated October 2008 and available on SEDAR. Resource estimation has been subsequently updated for production and exploration changes.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2010
Notes20102009
US$000US$000
Continuing operations
Revenue
115,80439,659
Cost of sales(94,176)(35,085)
Gross profit21,6284,574

General and administrative expenses
(7,684)(7,533)
Other operating costs(12,963)(8,893)
Exploration expenses(519)(656)
Impairment of mining properties-(21,914)
(Loss)/profit on disposal of property, plant & equipment(12)7
Operating profit/(loss)450(34,415)
Investment income349727
Finance costs(1,775)(1,807)
Loss before taxation(976)(35,495)
Income tax(3,462)1,228
Loss for the year(4,438)(34,267)
Attributable to:
Equity shareholders of the parent company(6,072)(34,267)
Non-controlling interests1,634-
Loss for the year(4,438)(34,267)
Other comprehensive income
Exchange differences on translating foreign operations(1,309)1,974
Other comprehensive income for the year, net of taxation(1,309)1,974
Total comprehensive income for the year(5,747)(32,293)
Attributable to:
Equity shareholders of the parent company(7,759)(32,293)
Non-controlling interests2,012-
(5,747)(32,293)
Loss per share
Basic and diluted (cents per share)5(4.92)(30.25)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2010
Notes20102009
US$000US$000
ASSETS
NON-CURRENT ASSETS
Intangible assets648,35144,695
Property, plant and equipment727,88539,485
Other receivables2,3242,043
Deferred tax asset6931,228
Total non-current assets79,25387,451
CURRENT ASSETS
Other receivables9,0748,357
Inventories12,76715,790
Cash and cash equivalents20,9072,273
Total current assets42,74826,420
TOTAL ASSETS122,001113,871
CAPITAL AND RESERVES
Share capital2,3652,224
Share premium117,410101,993
Merger reserve15,10715,107
Share option reserve2,5563,952
Currency translation reserve9872,674
Accumulated losses(43,431)(39,643)
TOTAL EQUITY ATTRIBUTABLE TO THE PARENT94,99486,307
Non-controlling interests2,012-
TOTAL EQUITY97,00686,307
NON-CURRENT LIABILITIES
Provisions6,0594,578
Total non-current liabilities6,0594,578
CURRENT LIABILITIES
Trade and other payables15,92017,117
Corporation tax3,016-
Borrowings-5,869
Total current liabilities18,93622,986
TOTAL LIABILITIES24,99527,564
TOTAL EQUITY AND LIABILITIES122,001113,871
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2010
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share
capital
Share
premium
Merger
reserve
Share option
reserve
Currency translation reserveAccumulated
losses
Sub-totalNon-controlling interestsTotal
equity
US$000US$000US$000US$000US$000US$000US$000US$000US$000
BALANCE AT 1 JANUARY 20091,84189,40715,1073,152700(5,376)104,831-104,831
Loss for the year-----(34,267)(34,267)-(34,267)
Exchange differences on translating foreign operations----1,974-1,974-1,974
Total comprehensive income for the year----1,974(34,267)(32,293)-(32,293)
Issue of ordinary share capital38313,548----13,931-13,931
Share issue costs-(962)----(962)-(962)
Share option charge---800--800-800
BALANCE AT 31 DECEMBER 20092,224101,99315,1073,9522,674(39,643)86,307-86,307
Loss for the year-----(6,072)(6,072)1,634(4,438)
Exchange differences on translating foreign operations----(1,687)-(1,687)378(1,309)
Total comprehensive income for the year----(1,687)(6,072)(7,759)2,012(5,747)
Issue of ordinary share capital14115,423----15,564-15,564
Share issue costs-(6)----(6)-(6)
Share option charge--888--888-888
Reserve transfer---(2,284)-2,284---
BALANCE AT 31 DECEMBER 20102,365117,41015,1072,556987(43,431)94,9942,01297,006
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2010
20102009
US$000US$000
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
Operating profit/(loss) for the year450(34,415)
Depreciation19,8587,385
Impairment of mineral properties-21,914
(Decrease)/increase in trade and other payables(856)3,545
Increase in other receivables(1,698)(7,132)
Decrease/(increase) in inventories2,994(3,108)
Increase in provisions1,481248
Share option charge888742
Exploration costs written off7621
Loss/(profit) on disposal of property, plant & equipment5(7)
Exchange loss3151,391
NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES23,444(8,816)
CASH FLOWS USED IN INVESTING ACTIVITIES
Interest receivable4623
Interest payable(1,775)(1,035)
Purchase of property, plant and equipment(6,317)(2,290)
Purchase of intangible assets(5,718)(2,920)
Proceeds from sale of property, plant and equipment-15
NET CASH FLOWS USED IN INVESTING ACTIVITIES(13,764)(6,207)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of share capital15,56413,931
Issue costs paid(6)(962)
Repayment of borrowings(6,000)-
NET CASH FLOWS FROM FINANCING ACTIVITIES9,55812,969
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS19,238(2,054)
Cash and cash equivalents at start of period2,2734,416
Exchange losses on cash and cash equivalents(604)(89)
CASH AND CASH EQUIVALENTS AT END OF YEAR20,9072,273
CASH AND CASH EQUIVALENTS COMPRISE
Cash at bank20,9072,273

NOTES TO THE PRELIMINARY ANNOUNCEMENT

For the year ended 31 December 2010

1 Financial statements

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2010 or 31 December 2009. Statutory accounts for 31 December 2009 have been delivered to the Registrar of Companies and those for 31 December 2010 will be delivered in due course. The auditors have reported on those accounts; their report was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

2 Basis of preparation and accounting policies

Whilst, the financial information included in this preliminary announcement has been presented in accordance with International Financial Reporting Standards as adopted by the EU (IFRS), this announcement in itself does not constitute full compliance with IFRS. Details of the accounting policies are those set out in the annual report for the year ended 31 December 2009. These accounting policies have remained unchanged for the financial year ended 31 December 2010 except for those new standards issued and adopted in the year.

3 Dividends

The directors do not recommend the payment of a dividend (2009: nil).

4 Segment reporting

Operating segments have been identified on the basis of internal reports about components of the Group that are regularly reviewed by the Group's chief operating decision maker. The Group's chief operating decision maker is considered by management to be the board of directors. The operating segments included in internal reports are determined on the basis of their significance to the Group. In particular, operating mines are reported as separate segments together with exploration projects that have significant capitalised expenditure. An analysis of the Group's business segments is set out below.

KalsakaAngoviaBaomahunAll other segmentsTotal
US$000US$000US$000US$000US$000
Year ended 31 December 2010
External revenue – sale of gold90,64324,208--114,851
Direct costs of production(53,850)(20,984)--(74,834)
Other operating and administrative costs(7,687)(4,100)-(5,604)(17,391)
Segmental result - EBITDA29,106(876)-(5,604)22,626
Total assets49,00825,63644,55214,394133,590
Capital expenditure2,6423,6086,1792712,456
KalsakaAngoviaBaomahunAll other segmentsTotal
US$000US$000US$000US$000US$000
Year ended 31 December 2009
External revenue – sale of gold54,10722,823--76,930
Direct costs of production(38,155)(21,006)--(59,161)
Other operating and administrative costs(5,162)(3,752)-(4,594)(13,508)
Segmental result - EBITDA10,790(1,935)-(4,594)4,261
Total assets56,95627,06638,7322,031124,785
Capital expenditure5,7001,8443,3533410,931

In 2010 the Group had one customer (2009: one).

The segmental result reported represents earnings before interest, tax, depreciation and amortisation (EBITDA) and excludes share option charges, which is the measure of segmental profit regularly reported to the board of directors. The accounting policies of the reporting segments are different from the Group's accounting policies as follows:

  • Pre-commissioning income and expenditure at operating mines is not capitalised in the segmental results.
  • Income is accrued for gold bullion on hand at the period end in segmental results and, accordingly, no stock is recognised for this item.
  • The depreciation charge against segmental assets is based on a different total asset cost compared to the statutory accounts due, to the fact that income and expenditure is not capitalised during the commissioning period. In addition, the total asset cost is depreciated from the commencement of mining operations.

A reconciliation of segmental revenue to the Statement of Comprehensive Income is as follows:

2010
US$000
2009
US$000
Revenue for reportable segments114,85176,930
Revenue capitalised during commissioning phase of mining operations-(34,650)
Change in accrued revenue for gold bullion stock at year-end953(2,621)
Revenue for Statement of Comprehensive Income115,80439,659

A reconciliation of EBITDA to loss before taxation is as follows:

2010
US$000
2009
US$000
EBITDA for reportable segments22,6264,261
Depreciation and amortisation(19,858)(7,385)
Impairment of non-current assets-(21,914)
Share based payments(888)(742)
Net interest payable(1,729)(1,080)
(Loss)/profit on disposal of fixed assets(12)7
EBITDA capitalised during commissioning phase of mining operations-(5,583)
Change in accrued revenue for gold bullion stock at year-end436(1,047)
Exploration costs written-off(520)(621)
Exchange rate variance303(1,391)
VAT provided in year(1,334)-
Loss before taxation(976)(35,495)

A reconciliation of segmental assets to the Statement of Financial Position is as follows:

2010
US$000
2009
US$000
Total assets for reportable segments133,590124,785
EBITDA capitalised during commissioning phase of mining operations5,9625,962
Differences in depreciation and amortisation4,7996,085
Impairment of non-current assets(21,914)(21,914)
Accrued revenue for gold bullion stock at year-end(436)(1,047)
Total assets122,001113,871

A reconciliation of segmental capital expenditure to notes 6 and 7 is as follows:

2010
US$000
2009
US$000
Capital expenditure for reportable segments12,45610,931
EBITDA capitalised during commissioning phase of mining operations-(5,583)
Capital expenditure12,4565,348

Geographic information

Burkina FasoCote d'IvoireSierra LeoneUKOtherTotal
US$000US$000US$000US$000US$000US$000
Year ended 31 December 2010
Revenue90,28125,523---115,804
Non-current assets22,16712,81644,17394379,253
Year ended 31 December 2009
Revenue28,72810,931---39,659
Non-current assets33,64015,04838,5991224287,451

5 Loss per share

The calculation of the basic and diluted earnings per share is based on the following data:2010
US$000
2009
US$000
Losses for the purposes of earnings per share (net loss for the year attributable to equity holders of the parent)(6,072)(34,267)
Number of shares
Weighted average number of ordinary shares for the purposes of earnings per share ('000's)123,415113,280

There is no difference between the diluted loss per share and the basic loss per share presented. Due to the loss incurred in the year the effect of the share options in issue is anti-dilutive.

6 Intangible assets


Exploration and mining rights
US$000

Deferred exploration and evaluation costs
US$000

Total
US$000
COST
At 1 January 200930,22312,84843,071
Additions-2,9882,988
Exploration costs written off-(621)(621)
Exchange differences-1,4391,439
At 31 December 200930,22316,65446,877
Additions-6,0786,078
Exploration costs written off-(7)(7)
Exchange differences-(483)(483)
At 31 December 201030,22322,24252,465
AMORTISATION
At 1 January 2009---
Charge for the year1,034-1,034
Impairment charge1,148-1,148
At 31 December 20092,182-2,182
Charge for the year1,932-1,932
At 31 December 20104,114-4,114
NET BOOK VALUE
At 31 December 201026,10922,24248,351
At 31 December 200928,04116,65444,695
At 1 January 200930,22312,84843,071

Included within Exploration and mining rights is an amount of US$21.8 million in relation to the Baomahun Gold Project. This amount is recoverable through the exploitation of the project.

In addition, the Group holds two mining licences relating to the Kalsaka and Angovia Gold Mines. The value assigned to these licences on issue amounted to US$6.0 million and US$2.4 million respectively.

7 Property, plant & equipment

Mining, development and associated property, plant and equipment cost
US$000

Motor vehicles, office equipment, fixtures & computers
US$000




Total
US$000
COST
At 1 January 200977,3732,06279,435
Additions, net of results from commissioning phase(1)1,5218392,360
Transfer to inventories(2)(11,621)-(11,621)
Transfer to trade and other receivables(2)(1,189)-(1,189)
Disposals-(9)(9)
Transfer between asset categories(3)(1,047)1,047-
Exchange differences106070
At 31 December 200965,0473,99969,046
Additions5,5688106,378
Disposals-(60)(60)
Exchange differences(11)(51)(62)
At 31 December 201070,6044,69875,302
DEPRECIATION
At 1 January 2009-1,1831,183
Charge for the year6,8097617,570
Impairment charge(4)20,766-20,766
Exchange differences-4242
At 31 December 200927,5751,98629,561
Charge for the year16,8651,09317,958
Disposals-(55)(55)
Exchange differences(1)(46)(47)
At 31 December 201044,4392,97847,417
NET BOOK VALUE
At 31 December 201026,1651,72027,885
At 31 December 200937,4722,01339,485
At 1 January 200977,37387978,252
1.In accordance with industry practice all costs and revenues during the commissioning phase of the operation that are directly attributable to the operations are capitalised.
2.At 30 June 2009 the commissioning of the Kalsaka mine in Burkina Faso was completed and at 30 September 2009 the commissioning of the Angovia mine in Cote d'Ivoire was completed. Accordingly, amounts relating to the inventory of mined ore and recoverable taxes relating to the mine have been transferred from mining development costs to current assets during the period.
3.During 2009 certain of the Group's property, plant and equipment located at the Kalsaka and Angovia mines have been reclassified from mine development costs to equipment as the directors consider that this is a more appropriate asset classification. The prior period has not been adjusted for this change in accounting policy on the basis that this change would have no effect on the total value of property, plant and equipment or cumulative depreciation thereon at 1 January 2008 or 31 December 2008.
4.The impairment charge was recognised in respect of the Group's Angovia mine, which is a cash generating unit identified as a reportable segment under IFRS 8. Indirect taxes recoverable in Cote d'Ivoire has been excluded from the impairment loss calculation for the Angovia mine as this balance will be recovered in a different manner from the other net assets. A separate impairment provision has been made against indirect taxes recoverable. Full details of the impairment charge totalling $21.9 million recognised in respect of the Angovia mine in 2009 are given in the prior year's annual report.
Due to the losses incurred at Angovia in 2010, a further impairment review was carried out for this cash generating unit, excluding indirect recoverable taxes, at 31 December 2010. The recoverable amount was calculated by reference to both the value in use and fair value less costs to sell.
  • Value in use was calculated by reference to a life of mine economic model using the currently defined reserves set out in this annual report at a US$1,300 gold price and a 25% discount rate. On the basis that the mine was able to continue operating, and that the supply disruptions experienced during the political crisis were resolved, this demonstrated that no further impairment was required. A high discount rate was used to reflect the uncertainty in respect of the political crisis.
  • Fair value less costs to sell was calculated by reference to the value per resource ounce paid by investors for similar assets. Direct comparison is difficult due to the unique political situation in Côte d'Ivoire. However, applying a suitable discount to comparable resources based on the heightened political risk suggested that no further impairment was required.
  • Further consideration was given to the recoverable amount should the political situation in Côte d'Ivoire not be resolved. The Company has existing provisions in place to protect against the loss of the project as a result of war and political violence, including the risk of being forced to abandon the project, which indicated that no further impairment was required.

8 Contingent liabilities

In February 2011 the Company received a proposal for additional costs sustained by the mining contractor at the Angovia Mine totalling US$9.2m. The directors believe that the majority of the proposal is unfounded. The terms of the contract clearly state that the rates set out therein shall apply regardless of the difficulty in performing the works under the contract, such that the majority of the additional costs claimed cannot be recovered under the contract. A provision of US$2.7m is included in the financial statements, which, in the opinion of the directors, is the maximum amount payable under the proposal.

9 Post balance sheet events

On 7 March 2011, following significant unrest in Cote d'Ivoire, the Group decided to temporarily suspend operations at its Angovia mine. Following a detailed review by management this temporary situation was not considered to materially impact upon the carrying value of the assets relating to this operation, nor the going concern status of the Group as a whole. The mine remains on care and maintenance at the date of this report, but subsequent to the improved situation in Cote d'Ivoire management is reviewing the most appropriate strategy for this asset.

Annual Report

The Annual Report will be sent to all shareholders on or around 3 June 2011 and will be available on the Company's website at www.cluffgold.com. Additional copies will be made available to the public, free of charge, from the Company's registered office at 15 Carteret Street, London SW1H 9DJ.

Annual General Meeting

The Company's Annual General Meeting will be held at St. Stephen's Club, 34 Queen Anne's Gate, London SW1H 9AB on Monday 27 June 2011 at 10.00a.m.

(1)As per the Company's Increased Mineral Resource Estimate at its Baomahun Gold Project, Sierra Leone press release announced on 4 June 2010
(2)A complete list of the infill drill results to date can be found in the Company's Baomahun Gold Project Feasibility Study Update press release announced on 3 May 2011
(3)As per the Company's Final VTEM Results for Baomahun Gold Project press release announced on 1 December 2010
(4)As per the Company's Kalsaka Exploration Drilling Update press release announced on 30 November 2010
(5)As per the Company's US$15M Private Placement with Macquarie Bank press release announced on 28 October 2010
(6)As per Semafo Inc's Annual Information Form 2010 as filed on SEDAR

NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS PRESS RELEASE.

Contact Information

  • Cluff Gold plc
    J.G. Cluff
    Chairman
    +44 (0) 20 7340 9790

    Cluff Gold plc
    Peter Spivey
    Chief Executive Officer
    +44 (0) 20 7340 9790

    Cluff Gold plc
    Pete Gardner
    Finance Director
    +44 (0) 20 7340 9790

    Evolution Securities Limited
    Jeremy Ellis
    +44 (0) 20 7071 4300

    Evolution Securities Limited
    Tim Redfern
    +44 (0) 20 7071 4300

    Pelham Bell Pottinger
    Lorna Spears
    Investor Relations (Global)
    +44 (0) 20 7861 3232

    Pelham Bell Pottinger
    Philippe Polman
    Investor Relations (Global)
    +44 (0) 20 7861 3232

    Farm Street Communications Ltd
    Simon Robinson
    Press Relations (U.K.)
    +44 (0) 7593 340 107
    simon.robinson@farmstreetmedia.com