| Thu 17 Apr 2008, 8:00 | | SIM - Simmers To Commence Development Of New Organ |
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SIM
SIIF
SIM - Simmers To Commence Development Of New Organic Growth Gold Projects
SIMMER AND JACK MINES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
Share code: SIM
ISIN: ZAE000006722
("Simmers" or "the company")
Simmers to commence development of new organic growth gold projects
Simmer & Jack Mines, Limited (Simmers or the Company) today announced that its
Gold Division would vigorously pursue several opportunities for organic growth
at Buffelsfontein Gold Mine in the North West Province and at TGME, its
Mpumalanga-based subsidiary.
Simmers chief executive Gordon Miller said that the Company had spent the last
three months updating technical reports for all its subsidiaries to ensure that
important decisions aimed at unlocking the value in the company were based on
updated, independently verified information. This was especially necessary given
that Eskom, South Africa`s national energy utility, is facing a power shortage
and has requested that the mining industry reduce electricity usage to 90% of
peak power requirements. The revised financial models also take into account the
impact of the recent 14.2% increase in electricity tariffs, as well as an
additional 53% increase that Eskom is seeking from July 2008.
"The independent technical reports are critical as they deal with the effect of
the Eskom power situation on our current operations, as well as providing an
assessment of the growth potential of new gold projects and the options open to
us in terms of alternative power generation.
"Despite significant challenges posed by the power situation, both the Buffels
and TGME reports, which have been helped by a higher gold price, confirm
significant growth opportunities that will substantially enhance Simmers` long-
life gold assets. This result is gratifying as it is an integral part of
Simmers` strategy to bulk up and reduce the risk profile of its gold business,"
said Miller.
Highlights
According to the Independent Technical Reports which will be filed during May
2008, the inclusion of the new gold projects at TGME and Buffelsfontein will:
- Increase total Life of Mine (LOM) ounces delivered to mill by 38% from
5.057 million ounces to 6.984 million ounces
- Increase Simmers` compliant Inferred mineral resources by 95% from 4.974
million ounces to 9.696 million ounces; Measured and Indicated resources
remain virtually unchanged (see summary tables below)
- Increase Simmers` compliant Proven and Probable reserves by 19.8% from
4.851 million ounces to 5.813 million ounces
- Enhance the Life of Mine Net Present Value (NPV) of Simmers` gold assets by
18.4%, from R2.537 billion to R3.003 billion
- Target the conversion of approximately 35 million conceptual ounces of gold
and 121 million conceptual pounds of uranium, to mineral resources at the
Strathmore project by spending R217 million (US$ 28.7 million) on
definition drilling and 3 D seismic surveys over the next six years
- Increase Life of Mine conceptual ounces by an additional 180% from 6.984
million to 19.567 million as a result of the inclusion of conceptual growth
projects at Buffelsfontein`s Strathmore Project and future TGME heap leach
projects.
Buffelsfontein Gold Mine (Buffels or BGM)
After taking into consideration the impact of the power situation, and the added
capital required to fast track additional surface production from the new Mega
Float Project, the revised technical report puts the projected NPV (based on
Reserves) of the Buffelsfontein Gold Mine at approximately R2.24 billion, with a
projected internal rate of return (IRR) of 78.1% using a real discount rate of
8%, a long-term gold price of US$ 711 per ounce and an exchange rate of R7.57 to
the US dollar. The previous independent technical report, dated March 2007,
valued Buffels at R2.372 billion using a nominal discount rate of 15.23%, an
average Life of Mine gold price of US$629 per ounce and an exchange rate of
R7.51 to the US dollar.
The higher electricity rates account for an additional R1 billion over and above
planned costs, thus diluting the impact of the higher gold price and the
additional ounces on the mine`s total NPV.
Mega Float Plant project: The successful commissioning of the new CIP plant in
December 2007 paved the way for the re-commissioning of the Buffels North plant.
Dubbed the Mega Float Project, it will allow Buffels to treat surface waste rock
material of 19 million tonnes at an average grade of 0.51 g/t (Inferred).The
project is estimated to have a life of seven years and will add an average of 35
000 ounces of gold per annum to Buffels` production profile at a cash cost of
US$530/oz or US$6.42 per tonne treated for the duration of the project. Profit
from the treatment of waste rock material, which was originally factored in over
the full 20 year life of mine, will now flow in over a seven year period. The
project also allows Buffels to bring an additional 5.6 million tonnes of waste
rock dumps that were previously considered unviable, to account.
The capital requirement for this project is R156 million (US$20.8 million) to
realize an incremental NPV of R135 million (US$17.9 million) over the project
life, at a real discount rate of 8%, using an average exchange rate of R7.53 to
the US dollar in the first year.
The Mega Float project is expected to be commissioned in November 2008.
Strathmore: Based on the pre-feasibility study of the Strathmore exploration
programme, conducted by TWP consulting in January 2008, the Company has decided
to embark on a drilling programme in order to confirm the opportunity to exploit
the extensive conceptual resource which lies within a 4.5 kilometre radius
around the centre of the existing Strathmore Shaft system. This project has the
potential to add up to approximately 35 million ounces of gold and 120 million
pounds of uranium to Buffels current compliant resource base. Subsequent to the
TWP report dated January 2008, details of the exploration programme have been
further upgraded and now include a capital amount of R40 million (US$5.3m) to
complete a 3 D Seismic surface survey. This will assist the Company to
understand the structurally complex nature of the area. The recommended drilling
programme comprises approximately 43 500 metres of exploration holes over a
period of six years and is expected to cost R217 million (US$ 28.7 million).
Buffels currently holds the rights to the area under consideration. The
recommended exploration work is critical to provide the appropriate level of
information necessary to advance to a feasibility study for the establishment of
a new, deepened shaft infrastructure to access the entire target area.
"Strathmore has the advantage of having an existing world class shaft
infrastructure to a depth of 3 000 metres and we know that it is technically
possible to mine at depths in excess of 4 500 metres. In effect we will be
spending US$28.7 million to convert approximately 35 million conceptual ounces
to compliant resources which equates to a highly attractive conversion rate of
US$1.22 per ounce once we complete the drilling programme and feasibility
study," said Miller.
According to independent consultants TWP, this project has the potential to
generate a NPV of R2.74 billion based on a capital requirement of R9.1 billion
and a total life of mine production of approximately11.9 million ounces of gold
and 48.7 million pounds of uranium. Assumptions include a real discount rate of
8% using long-term consensus metal prices of US$711 per ounce of gold and
US$49.78 per pound of uranium and an exchange rate of R7.57 to the US dollar.
This compares to the previous preliminary estimate valuation of R4 billion which
was based on a higher exchange rate of R8.95 to the US dollar and an assumed
gold price of US$635 per ounce and US$45.83 per pound of uranium. This equates
to a R182 721/kg as opposed to the revised price of R173 043/kg.
The full TWP report and the revised exploration drilling programme can be viewed
on the Simmers website, www.simmers.co.za.
Power requirements for Buffelsfontein Gold Mine:
The updated Technical Report is based on Buffelsfontein Gold Mine being awarded
a base load requirement of 69mW. Currently, Eskom has derived a base load of
55mW for Buffelsfontein Mine which at 90% energy saving equates to 49.5mW. This
is based on the mine`s power usage through the period of October 2006 to
September 2007, when the mine was still undergoing rehabilitation work, and
therefore not operating at peak production levels.
"We are confident that we have a compelling case to allow Eskom to grant us the
power requested for this operation. Buffelsfontein Mine has a contractual
agreement with Eskom to provide it with peak power requirements of 113 mW. We
are asking for only 69% of that," said Miller.
Eskom has made an additional 275 mW available for allocation to contracted
mining clients. The allocation of this power is determined by a committee that
will consider each application on merit.
In terms of new growth projects, Simmers is committed to installing 9.4 mW of
power for the Mega Float project by refurbishing existing diesel generators.
This is factored into the capital costs of the project.
The Strathmore project is only anticipated to come on line after 2012, when it
is believed that the power situation will have normalized.
TGME
The Independent Technical Reports for TGME cover a preliminary assessment of the
operation`s shallow underground development projects and a pre-feasibility study
for the surface heap leach projects. These are the first technical reports to be
issued for the Mpumalanga operations since completion of the BIOX feasibility
study and initial heap leach studies, lending weight to the Company`s aim of
adding one million reserve ounces to TGME. This report also provides the basis
for adding production from TGME to Simmers` current life of mine production
profile. TGME`s Life of Mine NPV equates to R340 million (US$45.27 million),
based on a real discount of 8% and the same metal prices and R/$ exchange rate
as per Buffels.
Underground: The implementation of the BIOX process has brought to account 677
000 resource ounces into the Life of Mine Plan that were previously considered
uneconomical. The current Life of Mine plan includes the mining of Inferred
Mineral Resources. This is due to the fact that a significant portion of these
Inferred Resources did not meet the requirements of NI 43-101 to be upgraded to
the Measured and Indicated category due to inadequate historic quality control
protocols. The Company`s current underground exploration programme is aimed at
expediting the conversion of these resource ounces to reserves.
Previously, the dormant Rietfontein and Beta mines were not considered viable
due to the refractory nature of the ore body, which in the absence of BIOX
technology, limited gold recovery to between 30 and 45%. The installation of a
BIOX plant will see overall recoveries of between 70 and 80%, thereby making
both the Rietfontein and Beta mines viable operations.
It is expected that a capital sum of R218 million will result in underground
production peaking at 82 000 ounces in 2015 at an average cash cost of
US$492/oz, and a total cost of US$514/oz.
Surface: TGME has spent R35.28 million over the last two years in a surface
exploration programme to confirm the potential for using heap leach technology
to treat low grade surface oxide material in the Mpumalanga goldfields. The
Technical Report confirms that the exploration programme has thus far delineated
sufficient compliant resources to justify the building of four pilot heap leach
pads as part of the feasibility study which is due out in March 2009. 99 946
mineable surface ounces have been included in the Life of Mine Plan. The Company
has new order prospecting rights over 55 000 hectares, of which only 1% of the
total strike area has been sampled using soil geochem techniques. Of the 1% soil
geochem sampling area, only 6% has been drilled. The definition drilling
continues apace which means that new ounces are being added on a daily basis.
The feasibility study to confirm the heap leach potential is expected to be
completed by March 2009. The initial goal is to achieve 600 000 low cost heap
leach Reserve ounces. To understand the value of this conceptual surface low
cost heap leach potential, the Company intends to apply a realistic conversation
rate based on actual historical rates to calculate potential surface ounce
conversions in the various resource categories. TGME`s historical exploration
cost per Resource ounce for surface oxide deposits is US$50 per ounce. The
historical conversion ratio at TGME from Resource ounces to Reserve ounces is
56%, equating to a cost per Reserve ounce of US$88.
Given the Company`s increased understanding of the macro geology and the
mineralization of the area, an implied conversation rate of US$54 per resource
ounce is deemed realistic in order to unlock the conceptual heap leach
potential. At these conversion rates Simmers intends spending R46.4 million per
year over the next five years which is expected to realize an additional 977 000
in-situ Resource ounces, and 540 000 Reserve ounces.
The four heap leach pads, engineered on existing compliant Measured, Indicated
and Inferred Resources, are estimated to be built at a capital cost of R161
million, and are expected to yield 80 569 ounces over a four year period at a
total capital and operating cost of US$501/oz.
The necessary permitting to proceed with the first mini heap leach pad at
Elandsdrift has been granted, and permitting for the other three heap leach pads
is in progress.
Power requirements for TGME
TGME is largely unaffected by the Eskom power shortage. Electricity for the
underground mine at Frankfort is currently produced by diesel generators, and
the same method of power generation will be used at Rietfontein and Beta mines.
The metallurgical plant at Pilgrim`s Rest runs off Eskom power and provision has
been made for the installation of a 3 mW generator should the current incidence
of load shedding worsen and cause a further negative impact on the production
schedule. In terms of the surface projects, a small 500 KvA generator is
sufficient to supply the power demands of a heap leach pad. The above-mentioned
generators and their running costs have been included in the updated financial
models.
Changes to Resources and Reserves
Table One below shows the mineral resource statements as at March 2007 and
excludes the new gold projects at Buffels and TGME. Table Two shows the revised
mineral resource statement as at March 2008, reflecting the additional resource
added by the inclusion of the new gold projects:
Table One: RESOURCE STATEMENT as of March 2007
Underground Surface
Gold Gold
Moz Mt g/t Moz Mt g/t
Measured &
Indicated
Buffelsfontein Gold 11.124 35.563 9.73 0 0 0
Mine
0.604 3.045 6.16 0.031 1.315 0.74
TGME
Total M&I Resources 11.728 38.608 9.45 0.031 1.315 0.74
Inferred
Buffelsfontein Gold 2.699 8.932 9.40 0.307 18.466 0.52
Mine
1.828 14.076 4.04 0.140 4.547 0.95
TGME
Total Inferred 4.527 23.008 6.12 0.447 23.013 0.60
Resources
Proven & Probable
Buffelsfontein Gold 4.820 27.320 5.49 0 0 0
Mine
0 0 0 0.031 1.315 0.74
TGME
Total P&P Reserves 4.820 27.320 5.49 0.031 1.315 0.74
Table Two: REVISED RESOURCE STATEMENT as of March 2008
Underground Surface
Gold Gold
Moz Mt g/t Moz Mt g/t
Measured &
Indicated
Buffelsfontein Gold 11.025 32.138 10.67 0 0 0
Mine
0.600 3.063 6.09 0.122 5.061 0.75
TGME
Total M&I Resources 11. 35.201 10.27 0.122 5.061 0.75
625
Inferred
Buffelsfontein Gold 7.512 20.567 11.36 0.310 18.843 0.51
Mine
1.833 14.274 3.99 0.041 1.393 0.91
TGME
Total Inferred 9.345 34.841 8.34 0.351 20.236 0.54
Resources
Proven & Probable
Buffelsfontein Gold 5.739 29.168 6.12 0 0 0
Mine
0 0 0 0.074 2.463 0.94
TGME
Total P&P Reserves 5.739 29.168 6.12 0.074 2.463 0.94
Notes:
1. The increase reflects the fact that TGME surface and Buffels underground
resources have now been added to Simmers compliant resource statement
2. All figures are SAMREC and NI 43-101 compliant
3. Columns may not add up due to rounding
4. Resources are inclusive of reserves
5. Kg to oz conversion factor: 32.15076
6. Resources / Reserves are estimated using an average gold price of R152
097/kg
7. Reserves are stated as `fully diluted delivered to mill` figures
8. The assessment of the value of Life of Mine production ounces for the TGME
underground projects includes Inferred mineral resources that are
considered too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as mineral
reserves and there is no certainty that the preliminary assessment will be
realized.
9. Specific notes:
TGME UG Resources TGME UG Reserves
1. Effective Date: 29 1.Effective Date: 29 February
February 2008 2008
2. The tonnages and grades
are quoted as stope tons
3. SG used for the reefs are TGME Surface Reserves
as follows: 1. Effective Date: 15 April 2008
Dukes Hill/Clewer and
Frankfort Bevett`s =3.3 t/m3,
Rietfontein = 2.9 t/m3,
All other = 3.8 t/m3
TGME Surface Resources
1. Effective Date: 15 April Buffels UG Reserves
2008 1. Effective Date: 29 November
2. SG = 2.3t/m3 2007
Buffels UG Resources
1.Effective Date: 29 November Buffels Surface Reserves
2007 1. Effective Date: 15 April 2008
2. SG = 2.76t/m3
Buffels Surface Resources
1. Effective Date: 15 April
2008
2. SG = 1.6t/m3 (2, 5, 6
dumps)
3. SG = 1.67t/m3 (7, 9, 10
dumps)
Table 3: Summary of Changes
Tech Tech report Variance
report 2008 %
2007
Buffelsfontein Gold Mine
Inferred resource (Moz) 3.006 7.822 150
Measured and Indicated resources (Moz) 11.124 11.025 - 0.8
Proven and Probable reserves (Moz) 4.820 5.739 19.1
Life of Mine ounces (Moz) 5.057 6.207 2.7
2010 production rate (koz) 183.965 190.916 3.8
Capex cost per ounce - LOM plan (incl 23.28 27.88 19.8
Resources) US$
Cash cost per ounce - LOM plan (incl 383 464 21.1
Resources) US$
Cash cost per tonne (LOM plan incl 353 399 13
Resources) US$
Average US$ gold price 629 742 18
Average ZAR/US$ exchange rate 7.51 7.53 0.2
TGME Gold Mine
Inferred resource (Moz) 1.967 1.874 -4.7
Measured and Indicated resources (Moz) 0.635 0.722 13.7
Proven and Probable reserves (Moz) 0.031 0.074 139
Life of mine ounces (Moz) Nil 0.777 inf
2010 production rate (koz) Nil 44.522 inf
Capex cost per ounce LOM plan (incl Nil 85.2 inf
Resources) US$
Cash cost per ounce LOM plan (incl Nil 455 inf
Resources) US$
Cash cost per tonne LOM plan (incl Nil 424 inf
Resources) US$
Average US$ gold price Nil 759 inf
Average ZAR/US$ exchange rate Nil 7.51 inf
The independent technical review of the Simmers Gold Operations was conducted by
Minxcon (Pty) Limited. This was done in conjunction with TWP Consulting, who
evaluated each of the capital projects. Both companies and the respective
qualified persons who compiled the reports are independent of Simmer & Jack
Mines, Limited.
All technical disclosure in this news release relating to the Consolidated
Simmers Resource and Reserve Statements have been prepared in accordance with
SAMREC and Canadian National instrument 43-101 (NI 43-101) by Daan van Heerden,
B.Sc., M.Comm., Charles Muller, B.Sc, Pr.Sci.Nat, and Johan Odendaal, B.Sc.,
M.Sc., Pr.Sci.Nat all of Minxcon (Pty Ltd), each of whom is a "qualified person"
under NI 43-101.
CONFERENCE CALL
A conference call to discuss the findings contained in these reports will be
held at 16h00 on Thursday 17 April 2008. Dial in details are as follows:
South Africa: 011 535 3600; 0800 200 648 (toll-free).
CANADA: Toll-free 1 866 519 5086.
AUSTRALIA: Toll-free 1800 350 100.
UK: Toll-free 0800 917 7042.
USA: Toll 1 412 858 4600; Toll-free: 1800 860 2442
Cautionary Language Regarding Forward-Looking Information
This news release contains certain forward-looking statements. Forward-looking
statements include but are not limited to those with respect to the price of
uranium and gold, the estimation of mineral resources and reserves, the
realization of mineral reserve estimates, the timing and amount of estimated
future production, costs of production, capital expenditures, costs and timing
of development of new deposits, success of exploration activities, permitting
time lines, currency fluctuations, requirements for additional capital,
government regulation of mining operations, environmental risks, unanticipated
reclamation expenses, title disputes or claims and limitations on insurance
coverage and the timing and possible outcome of pending litigation. In certain
cases, forward-looking statements can be identified by the use of words such as
"plans", "expects" or "does not expect", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or
"believes" or variations of such words and phrases, or state that certain
actions, events or results "may", "could", "would", "might" or "will" be taken,
occur or be achieved. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of Simmer & Jack Mines, Limited to be materially
different from any future results, performance or achievement expressed or
implied by the forward-looking statements. Such risks and uncertainties
include, among others, the actual results of current exploration activities,
conclusions of economic evaluations, changes in project parameters as plans
continue to be refined, possible variations in grade and ore densities or
recovery rates, failure of plant, equipment or processes to operate as
anticipated, accidents, labour disputes or other risks of the mining industry,
delays in obtaining government approvals or financing or in completion of
development or construction activities, risks relating to the integration of
acquisitions, to international operations, to prices of uranium and gold.
Although Simmer & Jack has attempted to identify important factors that could
cause actual actions, events or results to differ materially from those
described in forward-looking statements, there may be other factors that cause
actions, events or results not to be as anticipated, estimated or intended. It
is important to note, that: (i) unless otherwise indicated, forward-looking
statements indicate the Company`s expectations as at April 2008; (ii) actual
results may differ materially from the Company`s expectations if known and
unknown risks or uncertainties affect its business, or if estimates or
assumptions prove inaccurate; (iii) the Company cannot guarantee that any
forward-looking statement will materialize and, accordingly, readers are
cautioned not to place undue reliance on these forward-looking statements; and
(iv) the Company disclaims any intention and assumes no obligation to update or
revise any forward-looking statement even if new information becomes available,
as a result of future events or for any other reason.
In making the forward-looking statements in this news release, Simmer & Jack has
made several material assumptions, including but not limited to, the assumption
that: (i) approvals to transfer or grant, as the case may be, mining rights will
be obtained; (ii) metal prices, exchange rates and discount rates applied in the
economic assessments are achieved; (iii) mineral resource estimates are
accurate; (iv) the technology used to develop and operate its two projects has,
for the most part, been proven and will work effectively; (v) labour and
materials will be sufficiently plentiful as to not impede the projects or add
significantly to the estimated cash costs of operations; (vi) outstanding
approvals for the completion of an acquisition, the transfer of mining rights
and the approval of mining rights will be granted; and (vii) black economic
empowerment ("BEE") investors will maintain their interest in the Company and
their investment in the Company`s common shares to a sufficient level to
continue to support the Company`s compliance with 2014 BEE requirements.
Contacts:
Simmer and Jack Mines Limited
5 Press Avenue, Selby, South Africa, 2025
www.simmers.co.za
For further information, please contact:
Gail Strauss, Group Communications at +27 11 830 0390 or 084 777 4060
gail@simmers.co.za
Johannesburg
17 April 2008
Sponsor
Sasfin Capital (A division of Sasfin Bank Limited)
Date: 17/04/2008 08:00:01 Produced by the JSE SENS Department.
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