The key focus for the company continues to be the Baomahun gold project in Sierra Leone, the broker said, where a definitive feasibility study is due in June/July.

Concerns over the scale of the potential fundraising at Baomahun should be lowered by the preliminary economic assessment at the producing Kalsaka mine in Burkina Faso as this should highlight Cluff’s flexibility going forwards. 

The PEA at Kalsaka, due this quarter, should give an indication of how the recent Sega acquisition will affect future cashflow, the broker added. 

“This is key as it provides the company with the cashflow it needs to fund operations internally while remaining flexible over its future plans; this therefore has the ability to take away some of the funding concerns which have dogged the company over recent quarters,” said Westhouse. 

Results are also expected from additional drilling at Cluff’s third project at Yoaure, Ivory Coast in the first three months of 2013.

At an EV/Resource oz of just $47/oz, Cluff continues to look good value, said the broker, which has a ‘strong buy’ recommendation and 117 pence target price.

Cluff Gold (LON:CLF,TSE:CFG) has appointed Hendrik Faul, head of mining at Anglo American (LON:AAL), as an independent non-executive director.

He brings more than 20 years of experience in surface and underground mining, processing, logistics and marketing, both in Africa and across the world, the company said.

The appointment comes after a board restructuring following the appointment of  mining analyst John McGloin to the position of executive chairman, when Algy Cluff, who founded the company, steps down at the AGM on May 28.

Tim Wadeson will also step down as director at the AGM, said Cluff.

Cluff's chief executive Peter Spivey said today: "We are delighted to welcome Hennie to the board of Cluff Gold." 

"His global experience as a professional mining engineer and track record in the African mining industry will add strong technical expertise to the team and we look forward to working with him as we bring Sega and Baomahun into production and deliver on our stated intention of becoming a mid- tier gold producer."

Spivey also thanked Wadeson for the "valuable role he has played since the inception of the company".

Faul has previously held several senior roles in the mining industry, including the chief executive of Anglo American's zinc operations and general manager for the Lisheen Mine in the Republic of Ireland.

Last month, Cluff revealed it had received an environmental permit for its wholly-owned Baomahun gold project in Sierra Leone.

This enables it to complete the environmental impact assessment for the project - one of the last outstanding parts of the feasibility study which remains on track for completion in the first half of this year.

The results, which are the last before chairman and founder Algy Cluff steps down from the company, saw EBITDA in 2011 jump 92 per cent to US$43.5 million.

Revenue rose by 5 per cent to US$121.7 million as a 30 per cent rise in the average realised gold price to US$1,586 per ounce outweighed a 3 per cent dip in production at Kalsaka to 71,500 ounces. 

Kalsaka increased its EBITDA contribution by 78 per cent to US$51.9 million, which Cluff said reflected a strong operational performance during the year.

The mine’s revenue rose 26 per cnet in 2011 to US$114.2 million from US$90.6 million.

Cash costs per ounce at Kalsaka rose to US$823/oz from US$793/oz in 2010.

The company recently acquired the Sega prospect, which is 20km away from Kalsaka and will extend the life of the mining operation there to at least 2015.

It raised £23 million to fund development of Sega and also to further expand the exploration programme at its Yaoure project in Cote d'Ivoire.

Cluff’s flagship project is Baomahun in Sierra Leone, which has 2.1 million ounces of indicated resources and a further 0.9 million ounces inferred.

A feasibility study for Baomahun is expected by June, with first production in 2014 Cluff said today.

“Following the payment of regulatory fees for the environmental permit, the final regulatory hurdle for development, the permit is expected imminently and the feasibility study remains on track for completion in June 2012,” it said.

“Following delivery of the feasibility study and financing, construction is planned to commence in November 2012 after the rains ease with an 18 month construction period expected. The first gold pour is therefore expected in 2014 with steady state production anticipated in 2015.”

Net profits in 2011 came in at US$17.2 million, compared with a US$4.4 million loss and operational cash flow rose by 75 per cent to US$41.1 million.

Asa Brindle, an analyst at Seymour Pierce, said: “We believe 2012 should be a defining year for the company as it builds on its position in Burkina Faso through the completion of the Sega project acquisition and with finalisation of the development programme for Baomahun in Sierra Leone.” 

The broker has a ‘buy’ stance at a target price of 136 pence.

The mining veteran is to become chief executive of a new natural resources company, the miner said today.

Cluff will remain as a consultant to the company after the AGM on May 21 when he will step down.

In a statement, Cluff said he was proud to have developed a strong portfolio of assets since 2003, with the support of the directors.

The company has brought two mines into production and advanced a third through to feasibility study, expected later this quarter, he said.

The agreement to purchase the Sega project in Burkina Faso has underpinned the company's medium-term productive capacity, he added.

"As an entrepreneur, I consider the most important judgements relate to identifying opportunities and recognising when different skills are required to deliver the next stage of development.

"I now believe it is time to leave Cluff Gold and I am pleased that we have managed to attract a new chairman with the knowledge and experience of John McGloin to lead the company going forward," he said.

Cluff said he now intended to focus on new opportunities in natural resources in both Africa and Europe, with a bias towards his original roots in oil and gas.

McGloin, previously head of mining at broker Collins Stewart, has a wealth of experience in the mining industry and Africa, having held various senior technical and analytical positions over past two decades.

He said he was delighted about his appointment.

"Having followed Cluff Gold as an analyst since the company was formed, I am very excited to have the opportunity to work with such a dynamic management team in order to progress, in my opinion, a robust suite of assets which have the potential for moving Cluff Gold to a mid-tier producer. This is a testament to Algy's hard work, entrepreneurial skills and perseverance...," he said.

Thanking Cluff for his "invaluable" contribution, chief executive Peter Spivey welcomed McGloin to assist with fully capitalising on the company's significant growth opportunities.

He said the appointment was necessary for the company as it now needed an executive chairman to spend significant time liaising with shareholders and the financial community in London and North America, while he (Spivey) continued to focus on building the operations and other business opportunities in Africa.

Cluff Gold (LON:CLF, TSE:CFG) has raised £23 million to fund development of its recently acquired Sega project in Burkina Faso and exploration across its portfolio.

The Africa-focused gold miner issued 25 million new shares through a bookbuild offer at 92p per share. The new shares represented approximately 18.9 per cent of the issued share capital prior to the offering. 

Peter Spivey, Cluff's chief executive, said the issue was oversubscribed by both existing and new shareholders.

The proceeds are earmarked to pay for the consideration and capital costs of the 600,000 oz Sega project and also to speed up the exploration programme at the Yaoure property in Cote d'Ivoire.

Cluff conditionally bought Sega from Orezone for about $15 million in cash and 11 million shares last month.  

The transaction is subject to the approval of the Burkina Faso government and the TSX.

The site is just 20 km from its existing mine at Kalsaka and Cluff said the acquisition will allow it to extend Kalsaka’s mine life substantially with limited upfront capital expenditure.

Work has already commenced on a preliminary economic assessment for Sega and Cluff is expected to use its cash flow once in production on its flagship development at Baomahun in Sierra Leone.

The firm said that it had the cash to pay for Sega, but did not want the additional US$10 million costs of bringing it on stream to affect its other exploration activities.

Broker Seymour Pierce said that its previous exploration budget this year would total US$20 million across the whole portfolio.  

Cluff expects significantly to increase this budget after the fundraising.

The miner added that Baomahun is making good progress, with results from a recently completed in-fill drilling programme to be incorporated into an updated resource due for publication in April. A bankable feasibility study is due in the first half of this year. 

Seymour Pierce lowered its valuation to 138p as a result of the additional shares to be issued, but added it could understand Cluff's desire to keep the current momentum in the story and the opportunity presented by Sega should be capitalised on quickly.

The highlight infill-drilling results included lengths between 3 and 31 metres with gold grades ranging from 1.4 grams per tonne (g/t) to as high as 7.9 g/t. The programme in total consisted of 33 holes over 7,024m.

Cluff said the results included significant multiple intersects that demonstrated the rich potential of the Baomahun deposit. It has restarted exploration drilling along strike from the main resource area.

Furthermore Cluff says that exploration drilling has restart along strike from the current resource area. 

Results so far include intersections with lengths ranging from 2 to 10 metres and grades of 1 g/t to 4.1 g/t.

An updated resource is expected in April 2012 that will incorporate the in-fill drilling results and will also be the basis of the final feasibility study.

These are attractive drill results according to Oriel Securities analyst Kate Craig.

"Overall today’s update is broadly positive, but we note that the market still awaits the award of environmental permit at Baomahun that will be the key near term

driver for the company," the analyst said in a note to clients.

Meanwhile Shore Capital analyst Yuen Low says he is an advocate of the stock.

"Cluff’s share price has performed strongly this year, bounding up from around 70p/share to the current c100p/share, which we believe to be in recognition that the company is beginning to show signs of success in addressing key investor concerns," Low told clients today.

"In our opinion, the shares could rise still further as exploration drilling demonstrates the potential for resource expansion along strike at Baomahun – and there is also the possibility of a high-grade underground operation further out in the future. 

"And then, there the exploration potential at Yaoure, Kalsaka, Mamoudouya and various Burkina Faso licences."

The miner added that it also expects to agree the position of the forest boundary and an environmental permit with the Sierra Leone government in this current quarter.

The environmental permit will allow the completion of the environmental impact assessment, which is the outstanding part of the feasibility study. Mine construction is expected to start later this year.

The miner added it is also assessing the possibility of building a hydro-electric power facility 40km north of the Baomahun project site, which would be funded by a third party.

A hydro plant could cut the potential power costs by 50 per cent and reduce cash costs by between US$50-100 per ounce of gold produced, Cluff said.

Peter Spivey, chief executive, added: “We continue to see the Baomahun project developing into a world class mine, encompassing not only the initial open pit development that will be the subject of our feasibility study, but also the longer term potential for additional resources along strike, high-grade feed from underground sources, and cost efficient hydro-electric power generation de-coupling the project economics from the long term oil price."

Wadeson, today, bought 20,000 Cluff shares at 93 pence (147 Canadian cents) per share for £18,600 (around C$29,346), the company said today in a stock exchange statement.

It brings his total holding in the company to 103,740 shares, or 0.08 per cent of the capital. Previously, Wadeson held 0.06 per cent.

Cluff is a gold company with a producing mine at Kalsaka in Burkina Faso. It also has assets in Sierra Leone and the Ivory Coast.

Earlier this month, the company said it entered into a binding agreement to acquire a gold project that lies within trucking distance from the Kalsaka mine.

The group is buying the licences and property of Orezone Gold Corp’s (TSE:ORE) Sega project for 11 million new Cluff shares and US$15 million in cash.

Sega hosts a NI 43-101 compliant gold resource comprising 450,366 gold ounces in the indicated category, contained in 8.3 million tonnes grading 1.69 grammes per tonne (g/t) gold, and 147,344 ounces of inferred, in 2.9 million tonnes grading 1.58g/t gold.

The acquisition will allow it to significantly increase the Kalsaka mine life with limited upfront capital expenditure, the company said.

Cluff put Angovia onto a care and maintenance basis last year but finance director Pete Gardner said that the prospect in the Ivory Coast still represents a real opportunity.

He told Proactive Investors that there is “a short-term opportunity to recommence mining in the oxide zone if we can find additional lateritic ore bodies“.

“Diamond drilling into the sulphide potential layer is showing visible gold in ore in multiple locations and that’s pretty exciting”, he added.

“It’s a bit of a challenge in terms of the assays because it’s quite ‘nuggety gold’ and we have to be much more systematic than with finely disseminated ore body.”

He said Cluff has to assay more to get a representative sample and results so far are only provisional results and from the first three holes, but adds that “every hole we are putting in we are seeing gold”.

Angovia also has a hydro electric power plant next door, abundant water and an existing mining infrastructure so capital expenditure would be lot lower than other locations.

He adds developing Angovia would help put a third leg under the company. 

At present, Cluff is producing from the short-life Kalsaka mine in Burkina Faso, though the long term potential lies at Baomahun in Sierra Leone.

Cluff had hoped to start the earthworks for construction of a mine at Baomahun in the first quarter of 2012, but this timetable been put back due to a delay in approval for the environmental impact assessment (EIA).

The hold-up, caused by the definition of a forest boundary around the site, means that the feasibility study for the project has also been put back.

Brokers have suggested it will take three months to resolve the situation with the Sierra Leone government, after which Cluff will move to complete the feasibility study and finance the project. First gold from Baomahun is expected in the first half of 2014.

Gardner said the delay in the feasibility study did not “take away from the economic robustness of the project or the timeline for the development of the project.“

“Our plan is effectively to use the time that the government has given us to make sure the project is as good as it can be.”

“When we announce it, we want investors to see the true potential of Baomahun. It is a nice strong grade, decent-sized property and it will form the basis of a robust mine.”

He said that Cluff’s current view is that it will produce about 135,000 ounces per year for an eight-year mine life.

“Within the open pit there are 100,000 ounces of inferred resources and the delay in the feasibility study it gives us time to drill that bring it up to the indicated category,” Gardner added.

“We will also go through all of the assumptions in respect of capital expenditure and will make sure that anything that can be improved, will be improved. “

“That doesn’t mean it’s not good enough as it stands today, but we want to put the optimal mine plan on the table and raise the finance.”

He says negotiations have started with debt finance providers and the group now has time to talk to development banks as well as commercial banks.

"It is very important our equity investors get the full benefit of the rising gold price," he said, though he adds in current markets debt is an attractive option.

Exploration is also underway at Kalsaka, Cluff’s producing mine in Burkina Faso. The mine had a storming third quarter with 23,000 ounces poured, but Gardner says that was exceptional and output will drift back towards the annual target of 70,000 ounces year on average.

As at 31 December 2010, Kalsaka only had an estimated 186,000 ounces of proven and probable reserves and Gardner says the critical factor is expanding reserves at the mine.

"I’m positive there will be a mine life extension at Kalsaka," he said.

“The mine is cash positive, but we would have liked to have been 12 months ahead in terms of exploration. We have time and have a lot of good targets to follow up."

Cluff said an independent resource estimate for Baomahun by SRK Consulting (UK) increased its total mineral resources to 2.1 million ounces in the indicated category and 0.9 million ounces in the inferred category. The new figure for the indicated resources, contained in 25.6 million tonnes of material at 2.5 grams of gold per tonne, represents a 46 per cent increase over the measured and indicated resources announced in June 2010.

These new NI43-101 compliant resource figures will be incorporated into the definitive feasibility study for Baomahun, which is progressing well and is expected to be completed during the fourth quarter of 2011, the group said in a statement. It will also incorporate a number of opportunities to save costs.

“The new resources underline the opportunity for Cluff Gold to achieve its objective of developing an open-pit gold mine at Baomahun, which has the potential to produce over 150,000 ounces of gold per annum,” said Peter Spivey, Cluff’s chief executive. “Furthermore, we believe that there is significant potential to further expand the resource base at Baomahun: within the existing open pitable areas, at depth accessible by underground mining methods, and within the remainder of our mining and exploration permits.”

Cluff plans to resume its drilling programme at the main resource area following the end of the wet season in November 2011, focusing on further opportunities that have been identified to increase the resource base through converting inferred resources to the measured and indicated categories. Exploration drilling will also resume along trend. 

House broker Evolution Securities described the increase in gold resources as “significant and that, with more than two million ounces now in the indicated category, it believe this will underpin the firm’s pending bankable feasibility study on the construction of an open pit mine to produce around 150,000 ounces of gold per annum.  “We have revisited our valuation model and we lift our target price from 135 pence to 155 pence to reflect today’s upgrade. We reiterate our Buy recommendation,” said the broker.

Independent broker Seymour Pierce also described the resource increase as “significant”. It added: “While production issues at Cluff's existing mines in Cote d'Ivoire and Burkina Faso have dominated recent news, we retain our ‘buy’ recommendation, believing that the company's project portfolio can be moulded into the 250,000-plus ounces per year production in the medium term, with Baomahun at the heart of this expansion.”

Seymour retained its target price of 136 pence per share.

Evolution’s forecasts estimate sales by Cluff will amount to US$113.3 million this year, compared with US$115.8 million in 2010. Pre-tax profits are expected to come in at US$20.5 million (translating to earnings per share of 6.5 US cents), compared with a pre-tax loss of US$1 million last year.

It also holds a pipeline of exploration licences.

In a statement ahead of today’s AGM chairman Algy Cluff highlighted that the US$195 million figure, which is just US$5 million less than the group’s entire market value, sounds daunting but he stressed that all funding options are being reviewed.

“The providers of finance are increasingly imaginative and the level of our equity contribution could be significantly eased through the use of alternative financing structures together with more conventional project finance,” Algy Cluff said.

The chairman also emphasised the significant progress made on the bankable feasibility study (BFS) for Baomahun.  Algy Cluff said he expects the final document to be ready in around three months time. 

Furthermore he believes the pivotal report will affirm that Baomahun as a robust gold mining operation.  A preliminary assessment estimates that the mine will be able to produce 157,000 ounces each year for eight years, at costs of around US$500.

Production could be enhanced through drilling because 75 percent of the Baomahun strike has yet to be explored, Algy Cluff added.  A number of cost optimisation studies are also being undertaken.

The chairman also speaks about the political situation in Sierra Leone and the Ivory Coast. “From a political standpoint Sierra Leone continues to be calm with much inward investment in mining, agriculture and tourism,” he said.

“In my Chairman's statement in the 2010 Annual Report which you have, I referred to the febrile state of much of African politics and we experienced our share of that recently in the Ivory Coast, where a stand off between the two Presidential contenders led to a virtually sclerotic collapse of the system rendering it impossible to obtain the supplies, not to mention the cash to sustain our small Angovia mine.” 

The Angovia project holds great hope for a future mine of some consequence, Cluff said. 

Algy Cluff added: “In Burkina Faso where we operate the Kalsaka mine we have also had to deal with an aspect of the febrile factor; in this case industrial action - now happily resolved - predominantly due to chronic food inflation although there were other factors. 

“This situation resulted in a loss of about three weeks' production. I am pleased to say that at the time we were ahead of budget so the stoppage has made no impact on forecast production of 70,000 ounces this year.”