Sept. 19 (Bloomberg) -- Central Rand Gold Ltd., a South African gold explorer, soared the most on record after it said it used the first part of a $7.25 million loan to buy new crushing equipment that will boost its output capacity.
The stock as much as quadrupled in the biggest jump since listing in November 2007 before closing almost three times higher at 4.70 rand in Johannesburg. About 178,000 shares changed hands, or 65 times the three-month daily average.
Central Rand Gold, based in Johannesburg, received the tranche worth $3.5 million that it raised by issuing loan notes to Hong Kong-based Redstone Capital Ltd., a deal announced Aug. 2. The funds will be used to finance improvements of its milling and crushing plants to increase capacity, the company said in a statement yesterday. The remaining $3.75 million will be drawn by the end of October.
“The problem with the company is it lacked investment and the opportunity to reset their business from an operational perspective,” Kieron Hodgson, a London-based analyst at Charles Stanley Securities Ltd., said by phone today. “This external investment has given management the opportunity to turn around and make those changes that are so required.”
Central Rand’s upgrades include installing a primary jaw crusher, which will help reduce primary crushing costs from about 24 rand ($2.49) per metric ton to 12 rand per ton, the company said.
“Early indications are that the capacity of the operations will be up by 150 percent,” Hodgson said. “The ability to have a mine in continuous production is something Central Rand has not had.”
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