Cluff Gold PLC
AIM : CLF
TSX : CFG

Cluff Gold PLC

November 29, 2011 09:30 ET

Cluff Gold plc: Q3 Results

- Significant increase in Q3 Gold Production to 24,758 oz

- Strong Q3 Operating Cash Flow of US$17.9m

LONDON, UNITED KINGDOM--(Marketwire - Nov. 29, 2011) - Cluff Gold ("Cluff Gold" or the "Company") (AIM:CLF)(TSX:CFG), the dual AIM/TSX-listed West African focused gold mining company, is pleased to announce its results for the quarter ended 30 September 2011.

HIGHLIGHTS

Financial
  • Strong Q3 EBITDA: US$22.0m (208% increase over US$7.1m in Q2 2011; Q3 2010: US$4.6m)
  • US$17.9m operating cash flow in the quarter used to fund the Baomahun feasibility study and exploration work across the Group's portfolio of assets
  • Cash balance of US$25.6m as of 30 September 2011
  • Discussions progressing with potential debt providers for the Baomahun project
Operations
  • Robust Kalsaka quarterly production of 23,611oz (61% production increase over 14,681oz in Q2 2011; Q3 2010: 16,986oz) as grades and strip ratio improve over the quarter
  • Cash costs of US$756/oz at Kalsaka, less than US$800/oz for the first time since Q2 2010
  • Stacking and leaching operations at Angovia contributed 1,147oz to the Group, at a cash cost of US$1,168/oz
  • Company is on track for 70,000oz of production in 2011
Exploration
  • Baomahun resource increase with 2.1 million ounces of indicated resources (25.6 Mt grading at 2.5g/t), 46% over the previously reported measured & indicated resources
  • Strengthened exploration team following the appointment of Peter Brown as Group Exploration Manager, with structured exploration plans defined across the asset base
  • Baomahun: On-going in-fill drilling aimed at further enhancing the existing resource base, in addition to along strike exploration plans
  • Kalsaka: Exploration drilling focused on a number of oxide targets to increase the existing mine life as well as deeper RC drilling focused on sulphide opportunities beneath the existing pits, with promising results received to date
  • Angovia: Diamond drilling programme focused on the long term sulphide potential, with visible gold in core apparent in multiple locations, together with RAB drilling programme targeting lateritic ore bodies to allow mining to re-commence in the near term

Peter Spivey, Chief Executive of Cluff Gold, commented:

"We are pleased to announce our Q3 2011 results, which include 23,611oz of production from Kalsaka, our strongest quarter to date, which leaves us on track to deliver on our 70,000oz production target for 2011. The strong operating cash flow generated at Kalsaka continues to ensure that we have the balance sheet to fulfil our exploration plans. Under the direction of our new Group Exploration Manager, Peter Brown, we are implementing our newly defined programmes to realise our exploration goals.

Our feasibility study at Baomahun will now be available in H1 2012 while we await the issuance of the environmental licence from the Government of Sierra Leone. Notwithstanding this, our confidence in the economic robustness of the project is underlined by the recent board approval of a US$16 million budget to commence long-lead infrastructure work commencing this quarter, enabling a rapid construction once the final development decision is taken. In addition, negotiations with potential debt providers are progressing well.

By bringing Baomahun into production, we remain committed to transforming Cluff Gold to a mid-tier gold producer with the first gold pour expected during H1 2014."

The Company will be hosting a live and subsequently archived audio webcast of the Q3 results presentation on the homepage of the company's website, www.cluffgold.com, starting at 9:30am (GMT) on 29 November 2011.

About Cluff Gold

Cluff Gold is a gold developer-producer with assets in West Africa. The Company generates significant cash flow through its Kalsaka gold mine in Burkina Faso. The Company remains focused on its objective of becoming a mid-tier producer through the development of its wholly-owned Baomahun project in Sierra Leone, which is expected to contribute an additional 135,000oz of gold per annum, with significant exploration potential along strike. With its experience of bringing new mines into production and a project pipeline spanning Burkina Faso, Côte d'Ivoire and Mali, the Company aims to further increase its production profile with its highly prospective exploration work across all assets.

Baomahun is Cluff Gold's defining development gold project in Sierra Leone. Definitive feasibility study work is progressing in the immediate resource area, where 2.1Moz of indicated resources (25.6Mt at 2.5g/t) and a further 0.9Moz of inferred resources (comprising 9.6Mt at 2.8g/t) have been delineated to date1. The current resource base is limited to only 1.5km of a total 12km strike length. Exploration drilling is on-going, targeting the 4km northerly strike extension of the current resource area.

1 See news release dated 5 September 2011 entitled "Cluff Gold: Significant Resource Increase at Baomahun"

Operational Review

Baomahun, Sierra Leone

The Baomahun project is the Company's flagship development project in Sierra Leone, where the Company is developing a two-fold strategy: to advance to production by completing a definitive feasibility study based on the currently defined resource areas, whilst continuing to explore along strike and at depth to demonstrate the substantial resource potential for the Baomahun area.

In September 2011 the Company announced a resource upgrade, with Indicated resources estimated at 2.1 million ounces of gold (25.6 Mt grading at 2.5g/t), representing a 46% increase over the measured and indicated resources announced in June 2010. Inferred resources now stand at 0.9 million ounces (9.6 Mt grading at 2.8g/t).

Progress has been made on the definitive feasibility study, with SRK Consulting Limited recently completing an initial open pit mine schedule based on a US$1,150 per ounce gold price, which contained 1.2 million ounces of indicated resources at an average diluted grade of 2.23g/t and a strip ratio of 12.6:1. The indicative open pit also contains 0.1 million ounces of inferred resources which have been treated as waste in the initial analysis. This generates a robust eight year mine life, producing 1.1 million ounces of gold at an average rate of 135,000 ounces per annum.

Further optimisation work continues, not least due to the initial results of geotechnical test-work received during Q4 2011 which indicated that the open pit slope stability is stronger than originally estimated, allowing pit wall angles to be increased with a corresponding reduction in the strip ratio.

The feasibility study will now be available in H1 2012 due to a number of factors pertaining to the environmental and social impact assessment. Most importantly, the government of Sierra Leone has not yet issued the final environmental licence to allow mine construction to commence, and it is now anticipated that this will be granted in H1 2012.

In the meantime, US$16m has been set aside for early infrastructure work, indicating the board's confidence in the economic robustness of the project. This infrastructure work will include rehabilitation of the site access road, upgrading of the exploration camp for the construction phase and detailed mill design work to secure an appropriate delivery date. Subject to receipt of the environmental licence, the current budget will also allow plant site earthworks to commence in advance of the rains in July 2012. Full construction should commence in November 2012, following the completion of the wet season, with a relatively simple construction timetable due to the early infrastructure work having been completed. Based on the foregoing, the Company currently expects the first gold pour to occur in 2014.

The Company is taking advantage of the delay to the feasibility study to further improve the economics of the project. Further in-fill drilling has started at the resource area with a focus of upgrading the remaining inferred resources within the provisional open pit to the measured or indicated categories. Results from this programme are expected in Q1 2012 for inclusion in the feasibility study.

Work is also on-going for the hydro-electric power project, located approximately 40km from the mine project, which has the potential to significantly reduce cash operating costs by providing low cost electricity for the project. Following the receipt of a draft feasibility study, work has commenced on permitting.

The Company is also assessing a number of options for financing the Baomahun mine construction. In addition to discussions with a number of project finance banks, the Company has held initial discussions with a number of other potential financiers ranging from industrial users of gold to specialist mining finance providers. The Company is committed to ensuring that the Baomahun finance is raised in the most appropriate way, minimising dilution to existing shareholders whilst ensuring that equity holders remain exposed to the long term gold price.

Exploration

In addition to the work on the current resource area, the Company is highly encouraged by the significant potential to further expand the resource base at Baomahun: both at depth, and within the remainder of our mining and exploration permits.

Prior to the wet season, 7,100m of diamond drilling was completed across the previously defined targets identified by the VTEM geophysical survey. Full results from this programme are not yet available, but those received to date do not reflect the grades and widths associated with the Baomahun project area. However, a number of encouraging intercepts have been identified which confirm that the geology of the resource area continues for at least 4km to the north along the banded iron formation. By contrast, results from the targets in the far north of the exploration permit, targets 2, 4 and 7, as defined in the original VTEM survey, did not contain any gold, with the interpreted conductors being associated with a different type of sulphide mineralisation. With this in mind, additional 3D analysis of the VTEM results for the resource area, the 4 km strike extension to the north and Target 6 (2 km to the east of the resource area) is being carried out. A further structural analysis will also be completed in early December, the results of which, together with the 3D VTEM analysis, will define new drill targets within the resource area and its extensions.

Our exploration drilling programme has resumed, focusing on the areas immediately to the north of the current resource area. An initial 11 hole programme comprising 1,700m of diamond core drilling has started, with further drilling to be planned once the results of the 3D VTEM analysis and structural interpretation are available.

Kalsaka, Burkina Faso

Production Statistics Three months ending Nine months ending
(Unaudited) 30 Sep 2011 30 Jun 2011 30 Sep 2011 30 Sep 2010
Ore mined (t) 549,931 384,565 1,401,125 1,111,779
Waste mined (t) 3,208,880 2,972,875 9,735,270 7,835,481
Total tonnage mined (t) 3,758,811 3,357,440 11,136,395 8,947,260
Ore processed (t) 451,454 326,337 1,230,422 1,111,155
Average ore head grade (g/t) 1.63 1.47 1.50 1.68
Gold production (oz) 23,611 14,681 55,129 57,817
Cash costs excl. royalties (US$/oz sold) 756 882 805 720
Average realised gold price (US$/oz sold) 1,705 1,507 1,551 1,172
EBITDA (US$m) 23,604 8,257 39,418 22,693

As previously discussed, 2011 was predicted to be a year of two halves at Kalsaka: a relatively weak first half as mining was to continue in lower grade areas, followed by a much stronger prediction for the second half as the grades strengthen at depth.

Operating and financial results in Q3 2011 saw the fulfilment of this prediction, with Kalsaka generating US$23.6m of EBITDA, an increase of 198% compared to the average for the previous two quarters. This was driven by strong production, which totalled 23,611oz in Q3 2011, 61% higher than in Q2 2011. Year-to-date production of 55,129oz is on track to deliver our production guidance of 70,000oz in 2011.

This significant jump in production is attributable to improved grades and a high level of stacked ore. Grades increased by 11% to 1.63g/t in the quarter as mining activities transitioned to higher grade areas of the ore body. Stacked ore totalled 451,454t in the quarter, a 38% improvement from Q2 2011, due to softer ore being processed with a higher resulting level of plant availability.

The transition to the deeper parts of the ore body also saw a 25% reduction in strip ratio to 5.8. This, together with the improvement in grade, saw a US$185/oz reduction in mining and processing costs for the quarter, which has led to total cash costs of US$756/oz, representing a 14% improvement over Q2 2011.

The strong operating results were also assisted by the strong gold price in the quarter. A total of 21,039 ounces of gold were sold at an average price of US$1,705/oz, 13% higher than achieved in the previous quarter.

Exploration

At Kalsaka, the extension of the oxide mine life is a key priority, with work nearing completion at a number of oxide targets. Resource updates are expected to be available by Q1 2012.

Exploration drilling continues with two available rigs focused on a number of different targets including the splays from the Goungre shear zone in the Eastern part of the exploration licence, which appear to be highly prospective, and the eastern extension of the East Pit. With strong cash flow from operating activities at Kalsaka, additional funds can be made available to accelerate exploration on any prospective targets with strong initial results.

Work has also commenced on the Yako licence, located 32km southwest of Kalsaka, with an updated resource calculation targeted for Q1 2012 on an area where inferred resources have previously been estimated. Follow up surface sampling along portions of a 20km long regional soil anomaly has been carried out with a view to defining anomalous zones for drilling in Q4 2011 and Q1 2012.

As well as focusing on the oxide potential, work is underway to define the longer term sulphide opportunities at the Kalsaka licence area. Once the oxide life of the project has been depleted, a CIL/CIP plant will be required to process the sulphide ore with the existing heap leach equipment available for re-location to other oxide targets.

To date, very little drilling has been carried out focused on sulphide targets at Kalsaka. Historical drill intercepts from the sulphide zone at Kalsaka include the following:

Hole ID FROM TO AU (g/t) Interval (m)
KRC0047 100 103 1.33 3
KRC0048 90 105 7.44 15
KRC0048 119 125 1.02 6
KRC0104 116 119 1.02 3
KRC0146 125 129 18.52 4

A further twelve RC holes have been drilled in 2011 to date. These have focused on the areas below the existing K Zone Pit. Of the holes drilled, assay results are currently available for eleven holes, with five holes containing sulphide mineralisation as set out in the table below and six holes without sulphide mineralisation:(2)

Hole ID FROM TO AU (g/t) Interval (m)
KRC0193 119 125 5.96 6 including 2m @ 15.8 g/t
KRC0193 145 150 1.12 5
KRC0289 145 150 6.63 5 incl. 3m @ 9.94 g/t
KRC0290 124 132 8.22 8 Incl. 2m @ 29.76 g/t
KRC0496 105 121 1.28 16
KRC0573 170 171 1.00 7

(2) The drilling programme at Kalsaka was undertaken by an independent drilling contractor. All the drill holes collar positions were pegged using a total station theodolite and re-surveyed after drilling. The drill collars after survey were checked by onsite geologist. Each 1.0m RC chipping passing through a cyclone is collected in a plastic bag and reduced in a multistage splitter to get a split of between 2kg and 4kg. Sampling was done under the supervision of the site geologist. Duplicate samples were collected at every 10th sample point and one blank inserted at every 20th point. Samples were submitted to the in-house laboratory, dried, crushed and pulverised to 85-90% passing 106 micrometres and analysed by bulk leach extractable gold assays for twelve hours. Check assays were also submitted to external commercial laboratories in Burkina Faso as part of the Company's quality control procedures.

A diamond drill rig is being sourced to gather additional geological and geotechnical information as part of the sulphide evaluation programme. Further work is also planned to investigate the sulphide potential below the existing East Pit. The objective is for initial sulphide resource estimates to be available during 2012.

Angovia, Côte d'Ivoire

Production Statistics Three months ending Nine months ending
(Unaudited) 30 Sep 2011 30 Jun 2011 30 Sep 2011 30 Sep 2010
Ore processed (t) 32,619 - 172,460 636,503
Average ore head grade (g/t) 0.86 - 0.73 0.91
Gold production (oz) 1,147 920 5,514 15,852
Cash costs excl. royalties (US$/oz sold) 1,168 n/a 1,722 902
Average realised gold price (US$/oz sold) 1,682 1,587 1,485 1,169
EBITDA (US$m) 680 (500 ) (1,396 ) 4,091

The Angovia mine in Cote d'Ivoire remains on care and maintenance, with a dual strategy focused on defining sufficient lower cost, near surface lateritic ore bodies to allow the mine to recommence using the existing heap leach infrastructure, and defining the long term sulphide potential.

Leaching of the previously stacked material resumed in late Q2 2011 after the suspension of operation in March 2011, with the previously mined stockpile also added to the heaps. This generated a total of 1,147oz gold in the quarter at an average cash cost of US$1,168/oz, allowing Angovia to generate a positive EBITDA despite operations remaining disrupted. Gold production is expected to continue at a low level throughout Q4 2011 and Q1 2012 ensuring that the care and maintenance operations remain funded from internally generated cash flow.

Plans for a full resumption of mining activities are dependent on defining sufficient oxide resources to warrant mobilising a mining fleet to site. Exploration to date in 2011 has focused on a number of areas where it is expected that low grade, low strip-ratio lateritic ore bodies can be defined to achieve this aim, and we look to be in a position to report on progress in this regard in the annual results.

Although we are confident that additional oxide resources will be discovered to allow the recommencement of production with lateritic material, the Company remains focused on a long-term objective of bringing a CIL/CIP plant on line to realise the significant sulphide resource potential currently being investigated. Due to the existing mine infrastructure, abundant local water sources, and the availability of cheap hydro-electric power from the nearby Kossou barrage only 5km away, the resources needed to justify the construction of a CIL/CIP plant should be lower than would be the case in locations without these natural infrastructural advantages.

An initial 3,500m diamond drilling programme has commenced focusing on the sulphide potential around the existing Prospect 4 pit and the Kongonza prospect. Encouragingly, visible gold has been seen in core which suggests that a significant increase to the existing defined sulphide resources can be achieved in the near-term at both locations. Provisional assay results have been received for the first three holes on the previously un-modelled East-West structures within the Prospect 4 pit, with the best intercepts from each hole being 17.4m at 2.64 g/t from 55.4m, 14.2m at 1.94 g/t from 48.7m and 7.0m at 1.17 g/t from 76.0m3. Screen metallic assays are in progress for these holes, which provide a better analysis of gold content where coarse visible gold is present, and full results will be announced once these assays are received. A high resolution magnetic survey of the whole exploration permit and further structural analysis is planned for early 2012.

3 The Angovia drilling programme was undertaken by an independent drilling contractor. Drill cores used for assaying were sampled at a maximum of one metre intervals and were cut with a diamond saw with one-half of the core placed in sealed bags and sent to SGS preparation facilities in Yamoussoukro. The core samples were then crushed to minus 4mm and split, with approximately 1.5 kg of sample pulverised down to 85% passing 75 microns. Approximately 150 grams of the pulverised sample was then shipped to SGS laboratory in Tarkwa (Ghana) where the samples were analysed for gold by fire assay using a 50g sample. As part of the Company's QA/QC procedures, internationally recognized standards were adhered to, part of which includes inserting into the sample batches and using interlab comparisons of samples submitted to the external lab.

Mamoudouya, Mali

The Mamoudouya licence in Mali is an early stage exploration project located approximately 300km west of Bamako, the capital city of Mali, which covers 109 sq. km of highly prospective Mali Birimian Kinieba inlier belt.

Following the trenching work and very promising termite mound sampling completed in H1 2011, which defined a gold anomaly measuring 3.5km by 0.8 km, a Gradient Array Induced Polarisation ("IP") survey has commenced and 10,000m of RC drilling is planned to commence later in the quarter.

Financial

As expected, Q3 2011 represents a reversal of fortunes for the Group following the difficult trading conditions encountered in H1 2011, with record quarterly revenue and profit before taxation. This has been achieved through a combination of the continued growth in the gold price, improved strip ratio and grades at Kalsaka and the benefits of the run off on the remaining Angovia gold heap. Half year profit after tax of US$0.4m has improved to a profit totalling US$8.5m for the nine months ended 30 September 2011 which also compares favourably to US$2.5m for the nine months ended 30 September 2010.

EBITDA, the Group's preferred measure of operating performance, was US$22.0m for the quarter and US$33.1m for the nine months ended 30 September 2011. This performance was mainly driven by the production performance at Kalsaka, which generated US$23.6m in the quarter (an increase of US$19.4m on Q3 2010) and US$39.4m in the nine months to date (an increase of US$16.7m on 2010). In addition, Angovia returned to profit in the quarter generating segmental revenue of US$2.1m and EBITDA of US$0.7m from the remaining stacked material.

Whilst costs continue to rise due to inflation and price pressure from our main suppliers; the improved grades and lower stripping ratio in the quarter has seen the cash cost fall below US$800/oz at Kalsaka for the first time since Q2 2010 to US$756/oz.

Cash totalling US$17.9m was generated from operating activities in the quarter which was used to fund the feasibility study at Baomahun and exploration work at Baomahun, Kalsaka and Angovia of over US$8m. Cash balances increased by US$8.5m in the quarter and by US$4.7m in the year to date.

As at 30 September 2011 cash totalled US$25.6m compared to US$8.2m at 30 September 2010 and US$20.9m at the beginning of the year. These funds have been allocated to commence the initial infrastructure work at the Baomahun project in Q4 2011 through to Q2 2012, together with funding the increased exploration work at Kalsaka, Angovia and the prospects in Mali.

CLUFF GOLD PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the three and nine months ended 30 September 2011 and 2010
3 months
ended
30 September
2011
3 months
ended
30 September
2010
9 months
ended
30 September
2011
9 months
ended
30 September
2010
Notes US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Continuing operations
Revenue 38,817 25,294 86,592 86,253
Cost of sales (19,462 ) (23,041 ) (56,831 ) (64,757 )
Gross profit
19,355 2,253 29,761 21,496
General and administrative expenses (3,288 ) (1,177 ) (6,374 ) (5,214 )
Other operating costs (3,777 ) (3,120 ) (9,543 ) (8,886 )
Exploration expenses - (168 ) - (573 )
Operating profit/(loss) 12,290 (2,212 ) 13,844 6,823
Investment income 29 4 97 8
Finance costs (649 ) (576 ) (65 ) (1,259 )
Profit/(loss) before taxation 11,670 (2,784 ) 13,876 5,572
Income tax (3,188 ) (784 ) (5,016 ) (3,125 )
Profit/(loss) for the period 8,482 (3,568 ) 8,860 2,447
Attributable to:
Equity holders of the parent company 6,351 (3,366 ) 5,769 509
Non-controlling interests 2,131 (202 ) 3,091 1,938
Profit/(loss) for the period 8,482 (3,568 ) 8,860 2,447
Other comprehensive income
Exchange differences on translating foreign operations - (953 ) - (1,861 )
Other comprehensive income for the period, net of taxation - (953 ) - (1,861 )
Total comprehensive income for the period 8,482 (4,521 ) 8,860 586
Attributable to:
Equity holders of the parent company 6,351 (3,328 ) 5,769 (1,350 )
Non-controlling interests 2,131 (1,193 ) 3,091 1,936
8,482 (4,521 ) 8,860 586
Earnings/(loss) per share
Basic (cents per share) 8 4.82 (2.74 ) 4.38 0.41
Diluted (cents per share) 8 4.73 (2.74 ) 4.30 0.41
CLUFF GOLD PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2011
As at
30 September
2011
As at
31 December
2010
Notes US$'000 US$'000
Unaudited Audited
ASSETS
NON-CURRENT ASSETS
Intangible assets 3 62,441 48,351
Property, plant and equipment 4 19,939 27,885
Other receivables 2,192 2,324
Deferred tax asset 943 693
Total non-current assets 85,515 79,253
CURRENT ASSETS
Other receivables 4,834 9,074
Inventories 5 16,707 12,767
Cash and cash equivalents 25,559 20,907
Total current assets 47,100 42,748
TOTAL ASSETS 132,615 122,001
CAPITAL AND RESERVES
Share capital 7 2,374 2,365
Share premium 117,774 117,410
Merger reserve 15,107 15,107
Share option reserve 3,118 2,556
Currency translation reserve 987 987
Accumulated losses (37,507 ) (43,431 )
TOTAL EQUITY ATTRIBUTABLE TO THE PARENT 101,853 94,994
Non-controlling interests 4,723 2,012
TOTAL EQUITY 106,576 97,006
NON-CURRENT LIABILITIES
Provisions 6 7,397 6,059
Total non-current liabilities 7,397 6,059
CURRENT LIABILITIES
Trade and other payables 14,177 15,920
Corporation tax 4,465 3,016
Total current liabilities 18,642 18,936
TOTAL LIABILITIES 26,039 24,995
TOTAL EQUITY AND LIABILITIES 132,615 122,001
CLUFF GOLD PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the three and nine months ended 30 September 2011 and 2010
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share
capital
Share
premium
Merger
reserve
Share option
reserve
Currency translation reserve Accumulated
losses
Sub-total Non-controlling interests Total
equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2010 2,224 101,993 15,107 3,952 2,674 (39,643 ) 86,307 - 86,307
Profit for the period - - - - - 509 509 1,938 2,447
Exchange translation differences on translating foreign operations - - - - (1,859 ) - (1,859 ) (2 ) (1,861 )
Total comprehensive income for the period - - - - (1,859 ) 509 (1,350 ) 1,936 586
Issue of ordinary share capital 5 87 - - - - 92 - 92
Share option charge - - - 630 - - 630 - 630
Reserve transfer - - - (230 ) - 230 - - -
As at 30 September 2010 2,229 102,080 15,107 4,352 815 (38,904 ) 85,679 1,936 87,615
Loss for the period - - - - - (6,581 ) (6,581 ) (304 ) (6,885 )
Exchange translation differences on translating foreign operations - - - - 172 - 172 380 552
Total comprehensive income for the period - - - - 172 (6,581 ) (6,409 ) 76 (6,333 )
Issue of ordinary share capital 136 15,336 - - - - 15,472 - 15,472
Share issue costs - (6 ) - - - - (6 ) - (6 )
Share option charge - - - 258 - - 258 - 258
Reserve transfer - - - (2,054 ) - 2,054 - - -
As at 31 December 2010 2,365 117,410 15,107 2,556 987 (43,431 ) 94,994 2,012 97,006
Profit for the period - - - - - 5,769 5,769 3,091 8,860
Total comprehensive income for the period - - - - - 5,769 5,769 3,091 8,860
Issue of ordinary share capital 9 364 - - - - 373 - 373
Share option charge - - - 717 - - 717 - 717
Reserve transfer - - - (155 ) - 155 - - -
Dividend - - - - - - - (380 ) (380 )
As at 30 September 2011 2,374 117,774 15,107 3,118 987 (37,507 ) 101,853 4,723 106,576
CLUFF GOLD PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the three and nine months ended 30 September 2011 and 2010
3 months ended
30 September 2011
3 months ended
30 September
2010
9 months ended
30 September
2011
9 months ended
30 September
2010
US$'000 US$'000 US$'000 US$'000
Unaudited Unaudited Unaudited Unaudited
Cash flow from operating activities
Operating profit/(loss) for the period 12,290 (2,212 ) 13,844 6,823
Depreciation/amortisation 4,393 5,819 11,610 14,441
Increase/(decrease) in trade and other payables 2,544 3,506 4,236 (1,552 )
Increase in trade and other receivables (38 ) (2,864 ) (2,002 ) (4,834 )
Increase in inventories (1,433 ) (753 ) (2,759 ) (911 )
Increase in provisions 4 276 1,338 923
Share option charge 184 261 717 630
Net cash flows from operating activities 17,944 4,033 26,984 15,520
Income taxes paid (815 ) - (3,818 ) -
Cash flows used in investing activities
Interest receivable 29 4 97 864
Interest payable (5 ) (301 ) (23 ) (1,089 )
Purchase of property, plant and equipment (1,147 ) (1,335 ) (3,392 ) (4,911 )
Purchase of intangible assets (7,165 ) (2,050 ) (15,147 ) (4,372 )
Net cash flows used in investing activities (8,288 ) (3,682 ) (18,465 ) (9,508 )
Cash flows (used in)/from financing activities
Proceeds from the issue of share capital 8 - 373 92
Dividends paid (380 ) - (380 ) -
Net cash flows (used in)/from financing activities (372 ) - (7 ) 92
Net increase in cash and cash equivalents 8,469 351 4,694 6,104
Cash and cash equivalents at start of period 17,734 8,131 20,907 2,273
Exchange losses on cash (644 ) (275 ) (42 ) (170 )
Cash and cash equivalents at end of period 25,559 8,207 25,559 8,207
CLUFF GOLD PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
For the three and nine months ended 30 September 2011 and 2010

1. Basis of preparation

The interim financial information has been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and implemented in the UK. The accounting policies, methods of computation and presentation used in the preparation of the interim financial information are the same as those used in the Group's audited financial statements for the year ended 31 December 2010, which this interim consolidated financial information should be read in conjunction with. The financial information has been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting.

The financial information in this statement does not constitute full statutory accounts within the meaning of Section 434 of the Companies Act 2006. The financial information for the nine months ended 30 September 2011 and 30 September 2010 is unaudited, and has not been reviewed by the auditors.

After review of the Group's operations, financial position and forecasts, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the unaudited interim financial information.

2. Segmental reporting

An analysis of the consolidated income statement by operating segment, presented on the same basis as that set out in the 2010 annual report, is set out below:

Kalsaka Angovia Baomahun All other segments Total
US$'000 US$'000 US$'000 US$'000 US$'000
Three months ended 30 September 2011
External revenue 42,746 2,083 - - 44,829
Direct costs of production (17,091 ) (229 ) - - (17,320 )
Other operating and administrative costs (2,051 ) (1,174 ) - (2,297 ) (5,522 )
Segmental result - EBITDA 23,604 680 - (2,297 ) 21,987
Exploration expenditure 2,191 - 3,038 95 5,324
Other capital expenditure 464 559 161 44 1,228
Three months ended 30 September 2010
External revenue 20,200 5,360 - - 25,560
Direct costs of production (14,853 ) (3,541 ) - - (18,394 )
Other operating and administrative costs (1,196 ) (250 ) - (1,162 ) (2,608 )
Segmental result - EBITDA 4,151 1,569 - (1,162 ) 4,558
Exploration expenditure - - 1,356 - 1,356
Other capital expenditure 303 971 48 13 1,335
Nine months ended 30 September 2011
External revenue 86,508 8,346 - - 94,854
Direct costs of production (41,486 ) (7,355 ) - - (48,841 )
Other operating and administrative costs (5,604 ) (2,387 ) - (4,889 ) (12,880 )
Segmental result - EBITDA 39,418 (1,396 ) - (4,889 ) 33,133
Exploration expenditure 3,444 - 11,905 192 15,541
Other capital expenditure 2,248 793 393 101 3,535
Nine months ended 30 September 2010
External revenue 67,547 18,972 - - 86,519
Direct costs of production (40,048 ) (12,072 ) - - (52,120 )
Other operating and administrative costs (4,806 ) (2,809 ) - (3,849 ) (11,464 )
Segmental result - EBITDA 22,693 4,091 - (3,849 ) 22,935
Exploration expenditure - - 4,445 - 4,445
Other capital expenditure 2,255 2,583 60 13 4,911
A reconciliation of segmental revenue to that reported in the interim financial statements is as follows:
3 months ended
30 September
2011
3 months ended
30 September
2010
3 months ended
30 September
2011
9 months ended
30 September
2010
US$'000 US$'000 US$'000 US$'000
Revenue for reportable segments 44,829 25,560 94,854 86,519
Change in accrued revenue for gold bullion in stock (6,012 ) (266 ) (8,262 ) (266 )
Revenue for interim financial statements 38,817 25,294 86,592 86,253
A reconciliation of segmental EBITDA to the profit before tax reported in the interim financial statements is as follows:

3 months ended
30 September
2011

3 months
ended
30 September
2010

9 months ended
30 September
2011

9 month ended
30 September
2010
US$'000 US$'000 US$'000 US$'000
EBITDA for reportable segments 21,987 4,558 33,133 22,935
Depreciation and amortisation (4,387 ) (5,951 ) (11,610 ) (14,573 )
Share based payments (184 ) (261 ) (717 ) (630 )
Net interest received/(payable) 24 (297 ) 74 (1,081 )
Change in accrued profit for gold bullion in stock (4,002 ) (109 ) (5,240 ) (92 )
Exploration costs written-off - (575 ) - (575 )
Exchange rate variance (1,201 ) 1,121 (199 ) 858
VAT provided in period (567 ) (1,270 ) (1,565 ) (1,270 )
Profit/(loss) before taxation 11,670 (2,784 ) 13,876 5,572
3. Intangible assets
Deferred exploration Costs Exploration and mining rights Total
US$'000 US$'000 US$'000
Cost
At 1 January 2010 16,654 30,223 46,877
Additions 4,445 - 4,445
Exchange difference on retranslation (376 ) - (376 )
At 30 September 2010 20,723 30,223 50,946
Additions 1,633 - 1,633
Exploration costs written off (7 ) - (7 )
Exchange difference on retranslation (107 ) - (107 )
-
At 31 December 2010 22,242 30,223 52,465
Additions 15,541 - 15,541
At 30 September 2011 37,783 30,223 68,006
Depreciation
At 1 January 2010 - 2,182 2,182
Charge for the period - 1,727 1,727
At 30 September 2010 - 3,909 3,909
Charge for the period - 205 205
At 31 December 2010 - 4,114 4,114
Charge for the period - 1,451 1,451
At 30 September 2011 - 5,565 5,565
Net book value
37,783 24,658 62,441
At 30 September 2011
At 31 December 2010 22,242 26,109 48,351
At 30 September 2010 20,723 26,314 47,037
4. Property, plant and equipment
Mine development and associated
property, plant and equipment costs
Motor vehicles, office equipment, fixtures and computers Total
US$'000 US$'000 US$'000
Cost
At 1 January 2010 65,047 3,999 69,046
Additions 4,178 733 4,911
Exchange difference on retranslation (9 ) (36 ) (45 )
At 30 September 2010 69,216 4,696 73,912
Additions 1,390 77 1,467
Disposals - (60 ) (60 )
Exchange difference on retranslation (2 ) (15 ) (17 )
At 31 December 2010 70,604 4,698 75,302
Additions 2,591 944 3,535
Transfer 161 (161 ) -
At 30 September 2011 73,356 5,481 78,837
Depreciation
At 1 January 2010 27,575 1,986 29,561
Charge for the period 11,480 652 12,132
Exchange difference on retranslation (1 ) (43 ) (44 )
At 30 September 2010 39,054 2,595 41,649
Charge for the period 5,385 441 5,826
Disposals - (55 ) (55 )
Exchange difference on retranslation - (3 ) (3 )
At 31 December 2010 44,439 2,978 47,417
Charge for the period 10,825 656 11,481
Transfer 133 (133 ) -
At 30 September 2011 55,397 3,501 58,898
Net book value
At 30 September 2011 17,959 1,980 19,939
At 31 December 2010 26,165 1,720 27,885
At 30 September 2010 30,162 2,101 32,263
5. Inventories
As at
30 September 2011
As at 31 December 2010
US$'000 US$'000
Consumable stores 1,971 1,381
Ore stockpiles 1,900 1,668
Gold in process 8,758 8,661
Gold bullion 4,078 1,057
16,707 12,767
6. Provisions
Decommissioning, mine closure and site restoration provision
US$'000
At 1 January 2010 4,578
Provision in period 923
At 30 September 2010 5,501
Provision in period 558
At 31 December 2010 6,059
Provision in period 1,338
At 30 September 2011 7,397
7. Share capital
As at 30 September 2011 As at 31 December 2010
US$'000 US$'000
Authorised:
200,000,000 Ordinary shares of 1p each 3,080 3,080
No. No.
Issued and Fully Paid:
Ordinary shares of 1p each 131,852,026 131,269,331
US$'000 US$'000
Issued and Fully Paid:
Ordinary shares of 1p each 2,374 2,365

On 1 January 2011 182,565 ordinary shares of 1p were issued at 40p, on 17 March 2011 365,130 ordinary shares of 1p were issued at 40p, on 8 April 2011 25,000 ordinary shares of 1p were issued at 34p and on 4 August 10,000 ordinary shares of 1p were issued at 52.75p; all in respect of the exercise of share options.

8. Earnings per share

The calculation of basic and diluted earnings per ordinary share is based on the following data:

3 months ended
30 September 2011
3 months ended
30 September 2010
9 months ended
30 September 2011
9 months ended
30 September 2010
Shares Shares Shares Shares
Weighted average number of ordinary shares in issue for the period
- Number of shares with voting rights 131,848,222 122,765,595 131,733,492 122,666,694
- Effect of share options in issue 2,431,435 1,048,739 2,431,435 1,048,739
- Total used in calculation of diluted earnings per share 134,164,927 123,814,334 134,164,927 123,715,433
Profit/(loss) for the period attributable to owners of the parent (US$'000) 6,351,458 (3,366,270 ) 5,769,623 508,970
Earnings/(loss) per share
- Basic (cents per share) 4.82 (2.74 ) 4.38 0.41
- Diluted (cents per share) 4.73 (2.74 ) 4.30 0.41

For the 3 months ended 30 September 2010 the Company recorded a consolidated loss attributable to the equity shareholders of the Company. Accordingly, share options at that time were not dilutive and the diluted loss per share is the same as the basic loss per share.

9. Contingent liabilities

As stated in note 21 of the Annual report and accounts for the year ended 31 December 2010 the Company received a proposal for additional mining contractor costs at Angovia totalling US$9.2m. Whilst the situation remains unresolved the Company has received further external advice that confirms that the current provision of US$1.0m is, in the opinion of the directors the maximum payable under the terms of the contract.

During the period a further claim has been made by the contractor, totalling US$5.4m, in respect of costs incurred in 2011. Given that the contract has been terminated the directors consider this additional claim to be wholly without merit and accordingly have not made any further provisions.

This report includes certain "forward-looking information" within the meaning of applicable Canadian securities legislation.

All statements other than statements of historical fact included in this report, including, without limitation, the positioning of the Company for future success, statements regarding the exploration, drilling results and potential future production at Angovia, Kalsaka and Baomahun, the timing of the feasibility study for 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.

Non IFRS Measures - EBITDA (Earnings Before Interest, Income Taxes, Depreciation and Amortization), cash cost per ounce and average realised gold price are financial measures used by many investors to compare mining companies on the basis of operating results, asset value and the ability to incur and service debt. EBITDA is used because Cluff Gold's net income alone does not give an accurate picture of its cash generating potential. Management believes that EBITDA is an important measure in evaluating the Company's financial performance, ability to fund future capital expenditures and repay any future project financing, and in determining whether to invest in Cluff Gold. Similarly, cash cost per ounce and average realised gold price are measures that are considered key measures by Cluff Gold in evaluating the Corporation's operating performance. However, EBITDA, cash cost per ounce sold and average realised gold price are not measures of financial performance, nor do they have a standardized meaning prescribed by IFRS, and may not be comparable to similar measures presented by other companies.

Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of Cluff Gold's performance or to cash flows from operating, investing and financing activities of liquidity and cash flows. These measures have been described and presented in this document in order to provide shareholders and potential investors with additional information regarding the Company's operational performance, liquidity and its ability generate funds to finance its operations.

Peter Brown is a "Qualified Person" within the definition of National Instrument 43-101 and has reviewed and approved the information contained within this announcement. Mr Brown (MIMMM) is the Group Exploration Manager.

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

Contact Information

  • Cluff Gold plc
    Peter Spivey - CEO
    Pete Gardner - Finance Director
    Carrie Lun - Investor Relations Manager
    +44 (0) 20 7340 9790

    Collins Stewart Europe Limited
    John Prior - Corporate Broking
    Adam Miller - Corporate Broking
    Sebastian Jones - Corporate Broking
    +44 (0)20 7523 8350

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

    Farm Street Communications Limited
    Press Relations (U.K.)
    Simon Robinson
    +44 (0) 7593 340 107