| Tue 21 Aug 2007, 7:56 | | SIM - Simmers - Results for the three months ended |
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SIM
SIIF
SIM - Simmers - Results for the three months ended June 30, 2007 - Q1 F2008
SIMMER AND JACK MINES, LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
("Simmers" or "the company")
Share code: SIM
ISIN: ZAE000006722
RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2007 - Q1 F2008
Simmer & Jack Mines, Limited (Simmers) or (the Company) today announced that it
had narrowed its net loss by 45% from R96.5 million in Q4 F2007 to R52.7 million
for the first quarter of the 2008 financial year. Operating losses reduced by31%
from R99.8 million in the previous quarter (Q4 F2007), to R68.8 million.
Highlights
In Q1 F2008, the Company:
Recapitalised the company`s balance sheet: low risk cash investments now
- represent 50% of the Company`s market capitalisation as at 17 August 2007;
- Grew revenue 32.7% from R123 million for Q4 2007 to R164 million due to
increased gold production of 21%;
- Ended the quarter with cash on hand of R2.3bn, as opposed to R1.23bn for
the previous quarter;
- Increased gold production at Buffelsfontein by 13.3% and at TGME by 12.6%
compared to the previous quarter (Q4 F2007);
- Recorded the highest-ever underground tonnage production at Buffelsfontein
since the acquisition of the mine in 2005;
- Increased operating costs by 4% mainly due to increased volumes of 9.5%;
- a 2.5% increase in power costs due to winter rates and increased labour
costs;
- Added 56 000 ounces of low-cost heap leachable NI 43-101 compliant
resources at TGME in Mpumalanga through a successful drilling programme
bringing the total compliant resources to date to 88 740 ounces. This was
achieved at a current cost of R196/oz ($26.50/oz);
- Raised R350m for accretive gold projects through a successful share
placement, thereby giving a significant boost to the production profile of
Buffelsfontein and accelerating the Company`s exploration programme in
Mpumalanga;
- Saw First Uranium raise gross proceeds of CDN$150m through the issue of
senior unsecured convertible debentures;
- Reported the first profitable gold production from First Uranium`s
Buffelsfontein Tailings Recovery Project one year ahead of schedule due to
First Uranium`s acquisition of Mine Waste Solutions, also completed in this
quarter;
Achieved one-million fatality-free shifts at Buffelsfontein operation, and;
Concluded a two-year wage deal between Buffelsfontein and organised labour.
Group Strategy
The Company`s aggressive growth and development strategy remains on track with
the aim of becoming a `tier one`, low-cost producer of gold and uranium with a
target production of one million ounces of gold by 2012 and 2.3 million pounds
of uranium by 2011.
Simmers` growth and development strategy comprises three aspects, namely: the
organic conversion of its current resource base; an aggressive exploration
programme and the active pursuit of new business and acquisitions that fit the
Simmers` profile.
In June 2007, Simmers raised R350-million through a share placement in order to
fund two accretive gold projects aimed at converting resources to reserves:
Of the R350-million, R170-million has been earmarked for the re-opening of the
high-grade Number Five Shaft at Buffelsfontein which has added 700,000 reserve
ounces at a capital cost of US$33 per reserve ounce. Production at Five Shaft
will commence in the current financial year and is expected to deliver 12 000
ounces by March 2008 at a cash cost of US$378 per ounce.
An additional R130-million will be used to accelerate the Company`s exploration
programme in Mpumalanga by funding a feasibility study to confirm the findings
of the detailed conceptual study that has outlined the potential to define 1-
million ounces of resources and 733 000 ounces of reserves by March 2009.
Should the feasibility prove successful, production could ramp up to a rate of
250 000 ounces per annum by F2011 at a total capital and operating cost of $240
per ounce, assuming an exchange rate of R7.40 to the US$. The funds will be
applied in three phases:
- Accelerate and complete the drilling programme to allow the Company to
evaluate the resource potential of the surface deposits;
- Complete a pre-feasibility study based on those drill results by March
2008;
- Construction of new heap leach pads to confirm cost and metallurgical
parameters for the bankable feasibility study by March 2009.
First Uranium is also conducting its own independent, expansion programme. On 3
May 2007 FIU announced the completion of the private placement of CDN$150
million aggregate principal amount of 4.25% senior unsecured convertible
debentures due 30 June 2012. The Debentures will bear interest at a rate of
4.25% per annum payable semi-annually and will be convertible into common shares
of FIU at CDN $16.42 per share representing a conversion premium of
approximately 37.5% to the closing price of the shares on the TSX on 18 April
2007. FIU intends to use the net proceeds from the placement of the Debentures
as follows:
- to fund a drilling programme and feasibility study in respect of the
possible expansion of its Ezulwini underground uranium and gold project;
- together with the net proceeds of the December 2006 initial public offering
to fund the development of FIU`s Ezulwini underground mining project and
its Buffelsfontein tailings recovery project, and
- for general corporate purposes.
The South African Department of Minerals and Energy (DME) has since accepted an
application for a prospecting right for 20 km of strike adjacent to the Ezulwini
Mine. Subsequent to Q1 F2008, FIU defined initial underground and surface
drilling targets related to the possible expansion of the existing Ezulwini mine
(the Expansion Programme.)
On 7 June 2007 Simmers announced that the Competition Commission unreservedly
approved the acquisition of MWS by First Uranium (Proprietary) Limited (FUSA), a
subsidiary of FIU. MWS and its subsidiary Chemwes (Proprietary) Limited, own and
operate a gold mine tailings and re-processing facility adjacent to First
Uranium`s Buffelsfontein Project.
First Uranium acquired all the MWS shares through the issue of 3,093,980 FIU
common shares in full consideration of the purchase price.
As a consequence of the acquisition of MWS and the issuing of the new FIU
consideration shares, Simmers` shareholding in FIU diluted
from 67.2% to 65.49 %.
In terms of growing Simmer`s asset base, the post of New Business Development
Executive was created to enable a suitably qualified person to identify
potential accretive mergers, acquisitions and joint ventures. This post was
filled in Q2 when Syd Caddy joined the company on August 1, 2007.
Value discussion
Simmers is fully-funded in terms of being able to develop and grow its current
operations and convert its concept study of the heap leach potential in
Mpumalanga to a bankable feasibility study. The Company does not anticipate any
further funding calls with respect to its development of First Uranium`s two
projects, the refurbishment of the high-grade Five Shaft at Buffelsfontein Gold
Mine and the Mpumalanga exploration programme.
The Company is of the view that a significant value gap exists, in that the
Simmers share price equates fully to the underlying investment in FIU, while the
gold assets are ascribed a marginal value. As at close of business on 16 August
2007, Simmers` gold assets were valued at 33 cents per share which is
significantly below the independent NPV at 10% of R2,7bn and the R4bn valuation
based on peer group reserve and resource trading multiples.
Simmers has been subject to a disorderly market generated by margins calls on
single stock futures positions. These positions have been reduced to some 10% of
issued share capital as at 15 August 2007 (from around 18% as at 1 August 2007).
An assessment of key trading positions has shown that the remaining positions
are held by shareholders that have long term investment horizons. The softening
of the uranium spot price to its current US$105 level (as at 13 August 2007) has
also had a knock-on effect on the Simmers` share price, despite the fact that
First Uranium`s pricing models are based on US$50 per pound.
Simmers is approaching a key juncture in its development as First Uranium`s
mining operations begin to generate cash flows and the underlying value of the
gold is recognised by the market. Management remains committed to delivery
timelines and in particular has assembled technical capacity that exceeds
current requirements thus ensuring the needed focus on delivery.
Financial Overview
Simmers is in a growth and development phase and short-term results should be
viewed in the context of a Company gearing itself to optimally deliver into the
future. The emphasis remains on building infrastructure in order to become
sufficiently flexible to deliver on a sustainable, low cost production basis
well into the future.
In Q1 F2008, Simmers generated revenue of R164 million compared to R123 million
for the previous quarter (Q4 F2007). The increase is mainly due to the increased
production at Buffelsfontein as well as the initial revenue generated by MWS.
The cost of production increased quarter on quarter from R223 million to R233
million largely due to:
- increased labour costs as a result of the wage settlement concluded with
organised labour;
- higher electricity costs as a result of winter tariffs which come into play
from June to August each year;
- the inclusion of the MWS operating costs.
As at the end of the quarter Simmers had cash and cash equivalents of
R2.3billion compared to R1.2 billion for the previous quarter.
As at 30 June 2007 Simmers had total assets of R3.6 billion, total liabilities
of R727 million and shareholder`s equity of R2.9 billion.
Selected Unaudited Financial Information
The following table sets out selected unaudited financial information relating
to Simmers for the quarter ended 30 June 2007.
Selected Consolidated Financial For the For the
Information quarter quarter
(in `000s of ZAR Rand) ended ended
30 June 31 Mar 2007
2007 R`000
R`000
Income Statement
Gold revenue 163 894 123 451
Operating costs 232 719 223 349
Operating loss (68 825) (99 898)
Net loss (52 715) (96 545)
Balance Sheet
Total assets 3 643 065 2 027 772
Cash and cash equivalents 2 307 338 1 163 831
Current liabilities (247 007) (166 369)
Non-current liabilities (480 185) (393 177)
Share capital (815 820) (474 109)
Consolidated results of Operations
Revenue
The increase in revenue is mainly attributable to the increase in gold
production at Buffelsfontein and TGME as well as a R15 million contribution to
revenue from MWS in June 2007. At Buffelsfontein, gold production for the June
2007 quarter at 947.18 kg (30 453 oz) was 13.3% higher when compared to the
previous quarter. The increase in production relates to additional volumes in
underground and surface operations.
TGME Produced 63.48 kg (2038 oz) of gold compared to the previous quarter`s 56.4
kg (1813 oz) - a 12.6% increase.
Operating costs
At Buffelsfontein costs for the June 2007 quarter were negatively affected by
the average 8.22% wage increase negotiated with organized labour for the Fiscal
2008 year and contract costs for screening to upgrade the quality of the surface
waste rock dump feed to the plant. The first month of the annual winter
electricity tariffs also contributed to the quarter increase, as did an increase
in surface and underground tonnes milled.
At TGME costs for the June 2007 quarter decreased due to the closure of the
Clewer and Dukes Hill mines in March 2007, thus eliminating the costs of
operating two sections of the mine.
The acquisition of MWS, during the last month of the quarter added R13.7 million
to the operating costs for the quarter.
Net loss
The loss is not unexpected and is in line with the growth and development stage
that the Group currently finds itself in.
Financial Position and Liquidity
Cash and non-cash assets
Cash and cash equivalent balances at 30 June 2007 increased by R1.1 billion
primarily as a result of the convertible debenture and capital raising exercises
completed during the quarter as described in more detail earlier in this report.
Other increases in current assets relate to consumable inventory increases in
anticipation of the Ezulwini shaft refurbishment project and the MWS
acquisition; increases in trade and other receivables comprising of value-added
tax for goods and services refunds.
Non-current assets increased to R1.1 billion (March `07: R752 million) mainly as
a result of the acquisition of MWS and the corresponding additions to Mining
Assets, Plant & Equipment and Development & Infrastructure.
Cash position
At the end of the period under review, cash on hand amounted to R2.3 billion
compared to R1.2 billion in March 2007, mainly as a result of the completion of
the private placement for R350 million and the CDN$150 million aggregate
principal amount of 4.25% senior unsecured convertible debentures.
Total Liabilities
As at 30 June 2007 Simmers had total liabilities of R727 million (March `07:
R559 million). The increase is as a result of trade payables on capital
commitments for the refurbishing of the Ezulwini shaft and the increase in
environmental provisions for MWS.
Group outlook
The implementation of a rehabilitation plan for Buffelsfontein 5 Shaft will
greatly enhance the ability of Buffelsfontein to meet its long term production
and cost forecasts. Coupled with the concerted drive to constantly improve
available face length, the production forecasts for Buffelsfontein are likely to
be met in due course. Management`s, insistence on the establishment of a safe
operating environment has delayed the opening up of large high grade blocks in
the Five shaft area, which are available for mining. Reviews of the risk
assessments and site inspections of the rehabilitation project have been
conducted by representatives of all of the regional departments of the
Department of Minerals and Energy (DME), to ensure that best practise is
implemented for this project
At TGME the decision to focus on short term production gains through the
commissioning of heap leach pads to treat surface material should result in
significant improvements in revenue and costs reductions. Commissioning of the
first heap leach pad at Elandsdrift is dependant on the issue of the mining
right by the DME, which is being fast tracked.
At Elandsdrift, the Environmental Management Plan (EMP) for the mining right
application has been submitted to the DME and the affected authorities for their
comments. It is intended to pursue the finalization of the EMP with all vigour
to ensure that the heap leach pad can be commissioned this financial year.
An extensive drill campaign to identify further surface and underground mining
opportunities is well underway in the Pilgrim`s Rest/Sabie goldfields, and if
these target sites are fruitful, they too will be considered for heap leach
development.
Additional Information
A detailed Management Discussion and Review (MD&A) for the quarter can be found
on the Company`s website at www.simmers.co.za under the heading `Latest Results`
on the Simmers home page.
Conference call
Simmers will conduct a conference call with investors to discuss the Company`s
first quarter results for the 2008 financial year and related matters at 15h00
local Johannesburg time on Tuesday 21 August 2007. The conference call will be
available simultaneously to all interested investors and the media at South
Africa on 011 535 3600, or toll-free on 0800 200 648 (South Africa only).
An announcement regarding toll free numbers for the USA, UK and Canada as well
as playback details is available on the company`s website on www.simmers.co.za
Cautionary language and forward-looking Information
This report for the quarter ended June 30, 2007 contains certain forward-looking
statements concerning Simmers` operations, economic performance and financial
condition as well as plans and expectations. These statements, including
without limitation , those concerning the economic outlook for the gold and
uranium industry and market, expectations of gold and uranium prices,
production, the start and completion of certain exploration and production
projects, may contain certain forward-looking views. Such views involve both
known and unknown risks, assumptions, uncertainties and other important factors
that could materially influence the actual performance of the Company. No
assurance can be given that these will prove to be correct and no representation
or warranty express or implied is given as to the accuracy or completeness of
such views or as to any of the other information contained herein. Simmers`
future results may differ materially from past or current results and actual
results may differ materially from those projected in the forward-looking
statements.
Date: 21/08/2007 07:56:12 Produced by the JSE SENS Department.
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