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SIM
SIIF
SIM - Simmer And Jack Mines Limited - Provisional Results
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")
PROVISIONAL RESULTS
CONSOLIDATED BALANCE SHEET
2008 2007
Notes R`000 R`000
ASSETS
Non-current assets
Investment property 17 303 9 481
Property, plant and equipment 2 2 043 581 591 256
Goodwill 7 415 -
Financial assets 15 876 13 276
Environmental rehabilitation trust fund 3 167 418 137 657
2 251 593 751 670
Current assets
Inventories 4 51 668 30 852
Trade and other receivables 5 130 099 75 250
Cash and cash equivalents 1 582 012 1 163 830
1 763 779 1 269 932
Non-current assets held for sale 2 192 6 170
Total assets 4 017 564 2 027 772
EQUITY AND LIABILITIES
EQUITY
Equity attributable to equity holders of
parent
Share capital 843 357 474 109
Reserves 1 418 872 934 326
Accumulated loss (509 650) (341 960)
Convertible debentures - equity 6 280 580 -
Minority interest 334 175 401 751
2 367 334 1 468 226
LIABILITIES
Non-current liabilities
Convertible debentures - debt 6 844 963 -
Financial liabilities 7 - 159 505
Deferred tax 84 941 -
Environmental rehabilitation provision 8 254 638 233 672
1 184 542 393 177
Current liabilities
Financial liabilities 7 147 535 13 501
Trade and other payables 9 318 153 152 868
456 688 166 369
Total liabilities 1 650 230 559 546
Total equity and liabilities 4 017 564 2 027 772
CONSOLIDATED INCOME STATEMENT
2008 2007
Note R`000 R`000
Revenue 854 915 602 947
Cost of production (915 022) (640 118)
Loss from mining activities (60 107) (37 171)
Other income 66 968 37 018
General administrative and overhead
expenditure (169 950) (128 313)
Share option costs (78 555) (62 343)
Loss before finance charges/income
and fair value adjustment 10 (241 644) (190 809)
Finance income 142 505 36 135
Fair value adjustments 39 163 (11 636)
Finance costs (139 496) (23 410)
Loss before income tax (199 472) (189 720)
Taxation (33 098) (2)
Loss for the period (232 570) (189 722)
Attributable to:
Equity holders of the parent (167 690) (181 630)
Minority interest (64 880) (8 092)
(232 570) (189 722)
CONSOLIDATED CASH FLOW STATEMENT
2008 2007
R`000 R`000
Cash flows from operating activities
Cash (absorbed by) / generated from operations (202 664) 72 492
Finance income 142 505 36 135
Finance costs (139 496) (23 410)
Tax paid (5 305) (147)
Net cash (to) / from operating activities (204 960) 85 070
Cash flows from investing activities (1 113 984) (240 301)
Cash flows from financing activities 1 236 473 1 296 011
Net effect of exchange rate changes on
cash held in foreign currencies 500 653 -
Net increase in cash and cash equivalents 418 182 1 140 780
Cash at the beginning of the period 1 163 830 23 050
Total cash at the end of the period 1 582 012 1 163 830
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to the equity holders of the parent
Share Share Total Conver- Accumu- Total
Capi- premium share Reser-ves tible lated attribu-
tal R`000 capital R`000 deben- loss table to
R`000 R`000 ture - R`000 equity
equity holders
R`000 R`000
Balance 16 501 292 373 308 874 26 361 - (160 330) 174 905
at 1
April
2006
Loss for - - - - - (181 630) (181 630)
the year
Issue of 2 047 150 723 152 770 - - - 152 770
shares
for cash
Treasury 732 20 023 20 755 - - - 20 755
shares
movement
Share - (8 290) (8 290) (291 668) - - (299 958)
issue
cost
written
off
against
share
premium
Foreign - - - (36 550) - - (36 550)
currency
transla-
tion
reserve
Marked - - - 1 502 370 - - 1 502 370
to
market
reserve
Excess - - - (314 970) - - (314 970)
on
common
control
acquisit
ion
Valua- - - - 3 158 - - 3 158
tion
gain on
availa-
ble-for-
sale
invest-
ment
Share- - - - 45 625 - - 45 625
based
payments
Minority - - - - - - -
interest
movement
Total 2 779 162 456 165 235 907 965 - (181 630) 891 570
changes
Balance 19 280 454 829 474 109 934 326 - (341 960) 1 066 475
at 1
April
2007
Loss for - - - - - (167 690) (167 690)
the year
Issue of 1 077 345 907 346 984 - - - 346 984
shares
for cash
Treasury 381 28 566 28 947 - - - 28 947
shares
movement
Share - (6 683) (6 683) - - - (6 683)
issue
cost
written
off
against
share
premium
Conver- - - - - 280 580 - 280 580
tible
deben-
tures -
equity
Foreign - - - 113 921 - - 113 921
currency
transla-
tion
reserve
Share - - - (4 144) - - (4 144)
issue
costs in
subsi-
diary
Excess - - - 219 210 - - 219 210
on
common
control
acquisi-
tion
Share- - - - 152 958 - - 152 958
based
payments
Valua- - - - 2 601 - - 2 601
tion
gain on
availa-
ble-for-
sale
invest-
ment
Minority - - - - - - -
interest
movement
Total 1 458 367 790 369 248 484 546 280 580 (167 690) 966 684
changes
Balance 20 738 822 619 843 357 1 418 872 280 580 (509 650) 2 033 159
at 31
March
2008
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Minority Total
interest equity
R`000 R`000
Balance at 1 April 2006 2 313 177 218
Loss for the year (8 092) (189 722)
Issue of shares for cash - 152 770
Treasury shares movement - 20 755
Share issue cost written off against share - (299 958)
premium
Foreign currency translation reserve - (36 550)
Marked to market reserve - 1 502 370
Excess on common control acquisition - (314 970)
Valuation gain on available-for-sale investment - 3 158
Share-based payments - 45 625
Minority interest movement 407 530 407 530
Total changes 399 438 1 291 008
Balance at 1 April 2007 401 751 1 468 226
Loss for the year (64 880) (232 570)
Issue of shares for cash - 346 984
Treasury shares movement - 28 947
Share issue cost written off against share - (6 683)
premium
Convertible debentures - equity - 280 580
Foreign currency translation reserve - 113 921
Share issue costs in subsidiary - (4 144)
Excess on common control acquisition - 219 210
Share-based payments - 152 958
Valuation gain on available-for-sale investment - 2 601
Minority interest movement (2 696) (2 696)
Total changes (67 576) 899 108
Balance at 31 March 2008 334 175 2 367 334
NOTES TO THE REVIEWED PROVISIONAL FINANCIAL STATEMENTS
1 Accounting policies
1.1 General information
Simmer and Jack Mines Limited (`the Company`) and its subsidiaries (together
`the Group`) mine mainly gold and uranium. The Group has mining operations
in Gauteng, North West and Mpumalanga in South Africa.
1.2 Presentation of financial statements
The financial statements have been prepared in compliance with International
Financial Reporting Standards in accordance with IAS 34 and the Companies
Act of South Africa. The financial statements have been prepared on the
historical cost basis, unless otherwise stated.
These accounting policies are consistent with the previous year.
2 Property, plant and equipment
2008 2007
Cost Accumu- Carrying Cost Accumu- Carrying
R`000 lated value R`000 lated value
Depre- R`000 Depre- R`000
ciation ciation
R`000 R`000
Land and 19 593 (1 243) 18 350 13 646 (221) 13 425
buildings
Forestry 276 - 276 - - -
asset
Plant and 775 153 (123 045) 652 108 132 765 (5 090) 127 675
equipment
Furniture and 16 137 (3 310) 12 827 5 883 (1 426) 4 457
fixtures
Motor 9 855 (1 426) 8 429 2 239 (177) 2 062
vehicles
Mining assets 657 014 (67 386) 589 628 388 376 (36 868) 351 508
Computer 11 611 (4 794) 6 817 4 771 (1 701) 3 070
equipment and
software
Decommis- 43 675 - 43 675 17 808 - 17 808
sioning asset
Tailings for 241 097 (8 602) 232 495 - - -
processing
Development 439 953 (24 495) 415 458 73 163 (19 214) 53 949
and infra-
structure
Mining rights 4 691 (1 656) 3 035 4 212 (2 034) 2 178
Exploration 60 483 - 60 483 15 124 - 15 124
costs
Total 2 279 538 (235 957) 2 043 581 657 987 (66 731) 591 256
3 Environmental rehabilitation trust fund
The Group makes voluntary contributions to controlled funds that were
established to meet the cost of some of its decommissioning, restoration and
environmental rehabilitation liabilities. The use of these funds is limited
to the rehabilitation of the mines as directed by the Trustees with
Department of Minerals and Energy (DME) approval.
With the provisional liquidation process by DRD of Buffelsfontein Gold
Mining Company Limited (BGM) during 2005, the DME issued a directive,
whereby the then BGM Rehabilitation Trust Funds were "ring fenced" for the
specific rehabilitation of BGM and the funds were then transferred by DRD to
a DME-designated trust fund for this purpose. The directive also provided
that should the new owners establish a new trust, these funds could either
be transferred back to the new trust or remain in the Departmental Trust
Fund.
A new BGM Environmental Rehabilitation Trust was established during 2006 and
since then BGM has been unsuccessful with their requests to the DME to
transfer these funds back into the newly established trust.
The DME confirmed in a letter received by us on 21 May 2008 that interest
earned from investment of the funds accrues to the Department of Minerals
and Energy Rehabilitation Trust Fund for rehabilitation purposes. The DME
did not confirm the amount of interest accrued to date. Management has
however calculated and estimated the accrued interest based on earnings from
similar investments provided by Sanlam.
Legal opinion has been obtained confirming that the company is entitled to
the growth on the Trust Fund for the purposes of the rehabilitation of BGM.
It has instructed its attorneys to pursue its rights in this regard.
2008 2007
R`000 R`000
167 418 137 657
4 Inventories
2008 2007
R`000 R`000
Unprocessed ore (stockpiles) 11 505 7 339
Medical supplies 1 066 945
Consumables 22 814 10 069
Gold-in-process 12 054 5 045
Heap leach 5 094 8 164
52 533 31 562
Provision for obsolescence in consumables (865) (710)
51 668 30 852
5 Trade and other receivables
2008 2007
R`000 R`000
Trade and other receivables 60 617 49 318
Prepayments 3 784 4 323
VAT 65 698 21 609
130 099 75 250
6 Senior unsecured convertible debentures
On 3 May 2007 First Uranium Corporation (FIU) issued senior unsecured
convertible debentures (the "Debentures") in denominations of Cdn$1?000 in
the principal amount of US$135 060 000 (Cdn$150 000 000). The interest rate
on the Debentures is 4,25% per annum. The Debentures pay interest semi-
annually in arrears on the 30th of June and the 31st of December and have a
maturity date of 30 June 2012. The Debentures are convertible at the option
of the holder into FIU common shares at any time prior to the maturity date
at an exchange price of Cdn$16,42 per share.
7 Financial liabilities
2008 2007
R`000 R`000
At fair value through profit or loss
Aberdeen International Incorporated ("Aberdeen") 147 535 159 505
Simmers entered into an agreement with Aberdeen, a Canadian exploration and
royalty company trading on the TSX, whereby Aberdeen provided a loan
facility of US$10 million to acquire BGM.
The loan has a 3% coupon up to a gold price of US$400/oz and 2,5%
thereafter. In addition a Net Smelter Return ("NSR") on BGM`s gold
production is charged, which is linked to the price of gold ranging from
0,5% NSR at US$300/oz to a 4,75% NSR at gold prices of US$750/oz or higher.
The loan has a three year term with December 2008 as final repayment date.
Simmers has the option of extending the term of the loan for an additional
two years with a minimum repayment of 10% of the existing principal of the
loan at the time of the extension. Aberdeen has the option to convert the
debt into Simmers shares, subject to Simmers shareholders` approval, at
R0,80 per share after the first anniversary of the loan.
The loan is secured by a bond over BGM`s North Plant.
Dispute with Aberdeen:
Further to a previous disclosure regarding a dispute between Aberdeen and
the Group, the matter has been set down for hearing during the week
commencing 8 September 2008.
Notification was been received from Aberdeen alleging that, following the
private placement of ordinary Simmers shares concluded during May 2007,
Simmers was in breach of a right of first refusal held by Aberdeen. The
Group disagrees, as it is of the view that the right of first refusal does
not apply to the raising of capital by way of issuing new shares, and that
Aberdeen`s interpretation conflicts with JSE rules.
2008 2007
R`000 R`000
147 535 159 505
8 Environmental rehabilitation provision
Reconciliation of environmental rehabilitation provision
Addi- Addition Utilised
tional as a Dis- Unwin- during
provision result counting ding of the year
of of dis-
Opening acquisi- liabi count
balance tion of -lity Total
subsidia
ry
R`000 R`000 R`000 R`000 R`000 R`000 R`000
Environ- 233 672 52 816 24 963 (50 983) 7 312 (13 142) 254 638
mental
rehabi-
litation
The Group has an obligation to incur restoration, rehabilitation and
environmental costs when environmental disturbance is caused by the
development and mining activities. A provision is recognised for the present
value of such future costs.
It is anticipated that the cost of restoration and decommissioning will be
incurred over the life of the mine.
The environmental rehabilitation provisions of TGME, BGM and Chemwes have
been reviewed by GCS (Proprietary) Limited, a water environmental
engineering and science consultancy company.
The environmental rehabilitation provision for Ezulwini has been reviewed by
Johan Fourie & Associates, a consulting environmental engineering company.
The provisions are based on the estimated net cost for the respective
companies to rehabilitate their mines. On the assumption that third parties
will attend to the rehabilitation of the mines, the costs, including VAT and
10% contingency, are estimated at R610 million (2007: R300 million) and are
in the process of finally being agreed with the DME.
Guarantees in conjunction with Environmental Trust Funds have been put in
place for all of the abovementioned operations, except for the BGM
operation. This is due to uncertainty surrounding the confirmation of the
final agreed liablity with the DME. Once confirmation has been obtained, the
existing approved facility with Lombards will be called upon to furnish the
guarantee for the remaining shortfall.
The BGM liability has reduced during the course of the year due to the
disposal of a portion thereof to Chemwes.
9 Trade and other payables
2008 2007
R`000 R`000
Trade and other payables 288 295 139 469
Accrued leave pay 13 328 8 010
Accrued bonus 16 530 5 389
318 153 152 868
10 Operating (loss)/profit
Operating loss for the year is stated after accounting for the following:
2008 2007
R`000 R`000
Operating lease charges
Premises
- Contractual amounts 619 306
Equipment
- Contractual amounts 667 392
1 286 698
Profit on sale of property, plant and equipment (12 222) -
Impairment on property, plant and equipment 8 024 19 385
Impairment on trade and other receiveables 3 858 -
Production-related - Depreciation on 30 855 24 799
property,plant and equipment
Non-production-related - Depreciation on 14 006 1 138
property, plant and equipment
Employee costs - including share option costs 163 602 95 418
11 Contingencies
2008 2007
R`000 R`000
Guarantees
Guarantees in favour of Murray & Roberts 15 000 10 000
Cementation
Guarantees in favour of Eskom 8 500 8 500
The Group has contingent liabilities in respect of legal claims arising in
the ordinary course of business.
It is not anticipated that any material liabilities will arise from the
contingent liabilities other than those provided for.
As security for the obligations of BGM to FUSA to deliver the tailings dams
under the terms of the original Tailings and Rights Agreement entered into
between FUSA, BGM and Simmer and Jack Mines Limited, BGM registered a
notarial bond over the tailings dams in favour of FUSA to a maximum sum of
R1 455 000 000.
12 Headline loss
Reconciliation between loss and headline loss:
2008 2007
R`000 R`000
Basic loss for the year (232 570) (189 722)
Add back:
Impairment of exploration and mineral resources 1 569 -
Impairment of property, plant and equipment 8 024 21 976
Valuation gain on available-for-sale investment (2 601) (3 158)
Disposal of property, plant and equipment - gain (12 222) (2 591)
Disposal of property, plant and equipment - loss 30 -
Reversal of impairment (2 360) -
Minority interest (315) -
Headline loss for the year (240 475) (170 904)
Basic loss per share (cents)* (22,05) (19,56)
Diluted loss per share (cents)* (20,67) (18,76)
Headline loss per share (cents)* (22,35) (17,62)
Diluted headline loss per share (cents)* (20,95) (16,90)
Net asset value per share (cents)* 224,47 151,36
*Based on weighted average number of shares in
issue
Shares issued at 31 March 1 062 031 1 004 987
Weighted average number of ordinary shares in
issue 1 054 616 970 051
Adjusted for:
- Share options 70 715 41 005
Weighted average number of ordinary shares for
diluted earnings per share 1 125 331 1 011 056
Basic earnings per share is calculated by dividing the profit attributable
to equity holders of the Company by the weighted average number of ordinary
shares in issue during the year.
The comparative reported headline earnings have been restated due to the
adoption of SAICA Circular 8/2007 - Headline earnings.
Mineral Reserves and Resources
The mineral resource statement at 31 March 2008 was published on SENS on 17
April 2008. No material changes have occurred since then.
Comment
These results have been reviewed by the Company`s auditors, Grant Thornton.
Their unqualified review report is available for inspection at the Company`s
registered office.
F2008 HIGHLIGHTS
- Revenue up 42% from R603 million in F2007 to R855 million
- NAV increased by 61% from R1,5 billion to R2,4 billion
- Gold production up 10% from 139 860 ounces (4 350 kg) in F2007 to 154 710
ounces (4 812 kg)
- Attributable gold mineral resources increased by 13.7% to 45 million
ounces; total uranium mineral resources increased by 2% to 194 million
pounds
- Total mineral reserves increased by 58% to 7,7 million ounces of gold,
while uranium mineral reserves increased by 519% to 40,8 million pounds
- Ended the year with cash on hand of R1,6 billion
- Major capital projects at Buffelsfontein Gold Mine (BGM) initiated
including the high grade No.5 Shaft rehabilitation project
- New CIP plant successfully commissioned at BGM
- Completed metallurgical feasibility study at TGME
- Added 75 000 surface reserve ounces and identified two distinct
exploration areas capable of producing an additional 200 000 ounces of gold
from surface at TGME
- Fatality-free year at TGME and First Uranium`s Mine Waste Solutions (MWS)
and Ezulwini Mine
- FIU produces gold 12 months ahead of schedule
- Ezulwini Mine on schedule to produce gold from its own gold plant later
this month and to complete the final commissioning of its first uranium
plant by the end of August.
RESULTS FOR QUARTER AND YEAR ENDED 31 MARCH 2008
A detailed explanation of results can be found on the Company`s website,
www.simmers.co.za, under `Latest Results` in the document entitled
`Management`s Discussion and Analysis for the quarter and year ended 31
March 2008`.
Quarter ended 31 March 2008 Highlights
- Revenue up 22% quarter on quarter
- Produced 37 191 (1 157 kg) ounces of gold compared to 41 046 (1 277 kg)
ounces in Q3, a 9,4% decrease, primarily as a result of production delays
caused by power constraints
- Pre-feasibility study on the potential for development of surface oxide
deposits in Mpumalanga using heap leach technology completed
- Board approval to take the project to feasibility stage by continuing the
drilling programme and technical studies granted
- Mining rights to Elandsdrift and the greater TGME awarded
- Pre-feasibility study on exploration drilling programme for BGM`s
Strathmore Project completed
Post Q4, Simmers
- Completed independent technical reviews of both TGME and BGM in April
2008, taking into consideration the capital and operating costs of
generating additional power and a revaluation of metal price and exchange
rate assumptions, which enhanced the Life of Mine Net Present Value (NPV) of
Simmers` gold assets by 18,4%, from R2,537 billion to R3,003 billion
- Identified two potential growth projects that could dramatically enhance
BGM`s profile, viz. the Mega Float Project which aims to add 35 000 ounces
of low-cost gold production per annum to BGM`s production profile over the
seven year life of the project; and the conversion of conceptual gold ounces
and uranium pounds at Strathmore to compliant mineral resources
- Defined capital costs and received board approval to pursue exploration
and growth opportunities at Simmers` wholly-owned gold operations, BGM and
TGME, pending project finance
- Commenced construction of the Carbon In Solution (CIS) Plant at TGME`s
Elandsdrift leach pad in anticipation of being awarded the Water Use License
(WUL)
- Appointed Stuart Murray, CEO of Aquarius Platinum, to the Simmers board
During Q1 F2009, Simmers also plans to:
- finalise the position for the leach pad site to treat the Glynns Lydenburg
dump at Sabie
- submit mining right applications for the Hermansburg (Molototse Valley)
and DG2 (Pilgrim`s Trend) heap leach projects, both of which are oxide
deposits as opposed to tailings dams
- complete the rehabilitation of BGM` high grade No. 5 Shaft
- improve the accuracy of predicting future mining mix and average grade of
available face length by enhancing the opening up mining control system
linked to daily production achievements at BGM
- improve the percentage of pay ground mined at BGM
- publish NI 43 - 101 technical reports for BGM and TGME; of which TGME`s
will be at preliminary assessment level
- produce between 37 000 and 39 000 ounces of gold for the quarter for the
Group
Post Q4, First Uranium (FIU)
- Approved a plan and entered into agreements to supplement the power
supplied by the South African national power utility, Eskom, by obtaining
and installing diesel-run generators and a power plant to secure a steady
supply of electrical power with a total capacity of 54 megawatts (MW),
inclusive of existing stand-by units, to the two operations until Eskom
could be expected to restore a steady, reliable supply of electrical power
- approved, subject to financing, a plan to build an acid plant at MWS to
secure a low-cost supply of sulphuric acid, a necessary reagent for the
production of uranium, from the sulphur contained in the pyritic material
within the tailings dams, which are already being processed for gold
- Commenced dry commissioning of the Ezulwini gold plant during April 2008
- Completed the upgrading of the MWS gold plant to increase the design
capacity from 500 000 tonnes per month to 633 000 tonnes per month during
May 2008
- Received notification that Eskom would be able to increase power supply at
Ezulwini Mine from 40 MW to 55 MW
During Q1 2009, FIU also plans to:
- hoist and stockpile 30 000 tonnes of ore, of which 18 000 tonnes would
come from gold and uranium bearing ore in the Middle Elsburg (ME) reef
horizon and 12 000 tonnes would come from gold-bearing ore in the Upper
Elsburg (UE) reef horizon, resulting in a stockpiled inventory of 157 500
tonnes containing:
- 2 800 ounces of gold from the existing stockpile of 127 500 tonnes at an
average recoverable grade of 0,7 grams per tonne
- an additional 5 600 ounces of gold from the newly stockpiled 30 000 tonnes
at an average recovery grade of 5,8 grams per tonne
- 23 760 pounds of uranium from the newly stockpiled 18 000 tonnes of ME ore
at an average recovery grade of 0,6 kilograms per tonne
- continue commissioning the Ezulwini Mine`s gold plant, with the first
50 000 tonne per month module on schedule for production of gold on carbon
in June 2008 and gold bullion in July 2008
- commence final commissioning of the Ezulwini Mine`s uranium plant in June
2008
- process 1,7 million tonnes of tailings through the MWS gold plant at a
yield of approximately 0,15?grams of gold per tonne, with expected
production in excess of 8 100 ounces of gold
Simmers is in a growth and development phase at all its operations. In
common with all exploration and development assets, this phase requires a
high degree of capital expenditure to create the infrastructure that will
allow the operations to reach their peak production potential. At FIU`s MWS
and Ezulwini Mine this has resulted in limited gold production during F2008.
Production is expected to ramp up significantly in F2009, and will be
supplemented by uranium production at Ezulwini Mine from August 2008.
Commissioning of the MWS uranium plant begins in December 2008. At BGM,
much of the large infrastructure items have been expensed during F2008, with
capital expenditure for existing, funded projects set to decline
significantly from F2009.
During F2008, Simmers` recorded attributable production of 154 710 ounces (4
812 kg), which was sold at an average price of R177 635 per kilogram. This
translated into gold revenue of R854,9 million in F2008, a 42% increase on
F2007, from R603 million. The Group`s net loss before taxation for the year
amounted to R 199 million (F2007 : R189 million).
Average cash costs per kilogram for the various operations in F2008, were as
follows: R166 994/kg at BGM, R302 979/kg at TGME, and R122 759/kg at MWS.
Production costs for the Group increased from R139 048/kg in F2007 to R169
314/kg. Overall production costs for the Group increased from R640 million
in F2007 to R915 million, of which R107 million is as a result of the
Chemwes / MWS acquisition in F2008.
BGM, which is a long-life mine with a substantial resource base, is still in
the ramp up phase. The Company has invested significantly in capital
projects to ensure the sustainability of the operation and reduce the risk
profile to ensure that it is in a position to produce 6,2 million in situ
ounces over the life of mine.
BGM increased its operating revenue by 14% to R646,7 million (US$738/oz)
compared to R565,1 million (US$610/oz) in F2007. Despite year on year gains
in face advance and an increase in the number of tonnes milled, BGM produced
122 658 ounces (3 815,08 kg) of gold in F2008, compared to 131 240 ounces (4
082,02 kg) in F2007, a decrease of 6,5%.
This is largely as a result of lower than anticipated fourth quarter
production which was negatively impacted by the Eskom power crisis in
January 2008 as well as the stoppage of the high grade No. 5 Shaft complex
for seven weeks as a result of a severe storm which cut off both the main
and the back-up Eskom power supply to the shaft. As a result, production in
the fourth quarter was 887,6 kg (28 538 oz) compared to 938,6 kg (30 179 oz)
in Q3. Annual production was also affected by the lock-up of 151 kilograms
in the third quarter following the commissioning of BGM`s new CIP plant.
Much of the benefits of the development and opening-up done in F2008 will
only be realised towards the end of Q1 F2009 when the high grade No. 5 Shaft
provides increased face length which will significantly increase the average
grade of underground ore delivered to the?plant.
At TGME in Mpumalanga, both the surface and underground projects are
currently in a development phase pending feasibility studies which are due
for completion in March 2009. For this reason, TGME cannot be compared to
commercially operational entities.
Production during F2008 came primarily from the Frankfort Mine and totalled
9 316 ounces (289,76 kg), an increase of 6,9% over production of 8 717
ounces (271 kg) in F2007. F2008 was dedicated solely to the purpose of
resolving the metallurgical challenge posed by the refractory nature of the
underground ore, which effectively halved the mine`s potential gold output.
This test work was essential in order to determine whether TGME`s extensive
underground resource base could be mined profitably. For this reason the
metallurgical plant was intentionally run as a full scale test plant. Out of
all the options tested during F2008, BIOX technology resulted in the best
recoveries (80%) and lowest plant operating costs. It now remains to test
whether ore from Rietfontein and Beta Mines are amenable to the BIOX process
and to design the process accordingly. The BIOX feasibility study is due for
completion in March 2009. Further production from Frankfort will be deferred
until such time as the BIOX process is implemented.
In the interim, Dukes Hill, which has overall recoveries in excess of 65%
without the use of BIOX, will be re-opened and production will resume from
Q3 F2009. Plant costs will be significantly lower at Dukes Hill as its ore
is not refractory in nature. Despite Dukes Hill`s mining costs being similar
to those of Frankfort, it has the advantage of having significantly lower
transport costs. A combination of low total costs per tonne and the current
high gold price makes this a profitable venture despite the relatively low
grades.
In terms of surface operations, the results of the March 2008 pre-
feasibility study, has estimated a reserve of 75 000 ounces (2 332,8 kg),
equivalent to over eight years production at the F2008 level. The report
confirmed the potential to increase reserves by an additional 600 000 ounces
(comprising 400 000 ounces from underground and 200 000 ounces from surface
sources) by March 2009.
Exploration results continued to confirm the low-cost heap leach model
potential in the area and Phase 2 of the exploration programme has the
potential to add a further 400 000 surface ounces over the next five years,
bringing the total exploration target to 1 million ounces (31,1 t) by 2013.
Historically, exploration costs have amounted to $50 (R363) per resource
ounce. With a 56% conversion ratio from resources to reserves, the cost per
reserve ounce amounted to $88 (R369). Given the Company`s increased
understanding of the regional geology, these costs are expected to drop to
$54 (R392) per reserve ounce and are expected to result in an additional 977
000 oz in situ resource and 540 000 ounces reserve by 2013.
Going forward, Simmers expects TGME to achieve a major expansion in gold
production through three sources: new plant capacity designed to improve
recoveries from ore mined in underground operations; expansion of
underground operations; and, surface heap leach operations.
FIU, which is a 62,3% held subsidiary of Simmers, brought both its gold
projects on line at Ezulwini Mine and MWS in a remarkably short space of
time.
During F2008, MWS processed 4,1 million tonnes of material from its tailings
dams through the MWS gold plant at a cash cost of $533 per ounce that
includes 1,6 million tonnes reclaimed during Q4 2008 at a cash cost of $455
per ounce. The relatively high average cash costs at MWS are primarily due
to the diminishing resources taken from the tailings dams acquired with the
purchase of MWS, which necessitated a low-volume, high-cost mechanical load
and placement operation. In December 2007 the Company completed the
construction of a pipeline from the tailings dams at BGM to the MWS gold
plant. With the transition to the high-volume, low-cost operations
associated with the hydraulic mining of the Buffelsfontein Tailings, the
average cash costs started to decrease and are expected to decrease further
as the throughput to the MWS gold plant increases.
The Ezulwini Mine sold 2 680 ounces during Q4 2008 and 7 735 ounces during
F2008 at an average selling price of $884 per ounce and $869 per ounce,
respectively. As the Ezulwini Mine is still in a ramp-up phase and has not
yet achieved commercial levels of production, the $2,5 million revenue for
Q4 2008 and the $6,7 million revenue for F2008 from the sale of its material
has been credited against mine infrastructure costs at the Ezulwini Mine, in
property, plant and equipment.
FIU had no revenue in F2007 as it was developing and preparing the mining
projects for production. FIU incurred a loss of $22,3 million in F2008
primarily as a result of the ongoing and increasing expenditures for
developing and preparing the Ezulwini Mine and MWS for production which
exceeded the gross profits from gold sales. The Company reported a loss of
$7,9 million in F2007. The increase in expenditure year-on-year reflects the
ramp-up of activities, ongoing project activities, the costs of corporate
offices in Johannesburg and Toronto and other expenses of operating a public
company, which were not applicable for most of F2007.
At the end of F2008, Simmers had total assets of R4 billion, total
liabilities of R1,6 billion and shareholders` equity of R2,4 million. It had
cash and cash equivalents of R1,6 billion compared to R1,1 billion at the
end of F2007. The increase in cash and cash equivalents is attributable to
the net proceeds of $130,6 million received from the sale of FIU`s senior
unsecured convertible debentures in May 2007 and R350 million raised in June
2007 through a Simmers share placement to fund surface exploration in TGME
and the rehabilitation of No. 5 Shaft at BGM.
GROUP OUTLOOK
By updating the Independent Technical Reports for each of its projects,
Simmers has sought to remove the risk posed by the power situation in South
Africa. The new financial models have factored in anticipated tariff hikes,
as well as the cost of supplementing Eskom power with alternative power
generation. The reports conclude that even with the additional costs imposed
by the power situation, the projects are viable, with strong growth and
exploration upside.
Accordingly, Board approval has been obtained to pursue exploration and
growth opportunities at Simmers` wholly-owned gold operations, BGM and TGME.
Various additional funding options to develop these new projects are
currently being considered.
At BGM, underground gold production is expected to show a marked improvement
towards the end of Q1 F2009 as high-grade face length at the No.5 Shaft is
made available for mining. This will increase the overall grade of
underground ore delivered to the plant and boost gold production. Opening up
and development crews have been increased at all high-grade areas to ensure
the average delivered grade continues to increase to the reserve grade of 6
g/t. Screening of surface waste rock dumps has been initiated which is
expected to improve the delivered grade and increase surface gold
production.
At TGME, the focus is on rationalising cash flow and ensuring that capital
is spent on priority projects that will provide the best return on
investment. This includes getting Elandsdrift into production and continuing
the surface feasibility study. In terms of underground production, the focus
in the short term will be on getting the low-grade, but non-refractory
Duke`s Hill into production. Production from Frankfort Mine will be deferred
until such time as the BIOX process has been implemented.
The full commissioning of each of the gold and uranium plants are the next
major milestones for the Ezulwini Mine. The full commissioning of the first
50 000 tonne per month module of the 200 000 tonne per month gold plant is
on schedule for June 2008 and the production of gold bullion expected in
July 2008, three months ahead of the original schedule at the time of the
IPO in December 2006.
Ezulwini`s 100 000 tonne per month uranium plant is on schedule for
commissioning in June 2008 and the delivery of its first shipment of
ammonium diuranate ("yellowcake") is expected in August 2008.Current mine
production from the Upper Elsberg section and the Middle Elsberg section is
being stockpiled separately on surface to feed the gold and uranium plants.
FIU has entered into an interim off-take agreement with a third party, from
the planned startup of the uranium plant at the Ezulwini Mine in June 2008
until January 2009, pursuant to which the third party would purchase FIU`s
yellowcake production at rates based on the then prevailing spot prices.
At MWS the introduction of the new material from the Buffelsfontein No. 2
tailings dam to the MWS gold plant is ongoing. Upgrades to repulping of the
tailings, the pumping and the plant processes are expected to improve
volume, recoveries and costs in the MWS plant.
An upgrade to accommodate a deposition rate of 1,3 million tonnes of
material per month on the MWS No.5 tailings dam is planned in advance of the
commissioning of the second module of the MWS gold plant and the first two
modules of the uranium plant.
FIU anticipates that the estimated capital of $471 million required
(exclusive of the proposed acid plant) over the remaining life of the
Ezulwini Mine and MWS as well as $40 million approved for the long-term
Ezulwini Expansion Programme are expected to be funded from existing cash
and cash equivalents of $164,7 million. In addition internally-generated
cash flow from future sales of gold and uranium at current price
assumptions, along with funds that may be available under a proposed mandate
letter and term sheet with a financial institution for a credit facility
will be available. Discussions in respect of the credit facility and
potential lines of credit are ongoing. FIU plans to fund the proposed acid
plant through a separate project and/or end-user financing arrangement.
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING INFORMATION
Information Statements contained in this announcement that are not
historical facts are forward looking statements that involve risks,
uncertainties and other factors that could cause actual results,
performance, prospects and opportunities to differ materially from those
expressed or implied by such forward looking statements. Although Simmer &
Jack believes that the assumptions inherent in the forward looking
statements are reasonable, undue reliance should not be placed on these
statements, which only apply as of the date of this announcement. Simmer &
Jack disclaims any intention or obligation to update or revise any forward
looking statement, whether as a result of new information, future events or
otherwise.
Conference Call
A conference call to discuss the results will be held at 15:00 on 19 June
2008. Dial-in details for callers in South Africa are as follows: 011 535
3600 (toll) or 0800 200 648 (toll-free)
For international dial-in numbers, please consult the Simmers website,
www.simmers.co.za
Incorporated in the Republic of South Africa (Registration number
1924/007778/06) Share code SIM ISIN ZAE000006722 ("Simmers" or "the Company"
or "the Group")
Auditors
Grant Thornton 137 Daisy Street cnr Grayston Drive Sandown 2196
Transfer secretaries
South Africa Computershare Investor Services 2004 (Pty) Limited Ground
Floor 70 Marshall Street Johannesburg 2001 Republic of South Africa
United Kingdom Capita IRG plc The Registry 34 Beckenham Road Beckenham
Kent BR3 4TU United Kingdom
Registered office
5 Press Avenue Selby Johannesburg 2025 Republic of South Africa
Sponsor
Sasfin Capital A division of Sasfin Bank Limited Sasfin Place North
Block 13 - 15 Scott Street Waverley Johannesburg 2090 Republic of
South Africa
Directors
NRG Brunette (Independent Non-executive Chairman) BJ Njenje
(Non-executive Vice-chairperson) GT Miller (Chief Executive Officer) J de
V Berry (Executive Director) SLB Mapisa (Non-executive Director) EA
Meyer (Independent Non-executive Director) SA Murray (Independent Non-
executive Director) AX Sisulu (Non-executive Director) KPE Wakeford
(Independent Non-executive Director)
Date: 19/06/2008 08:00:01 Produced by the JSE SENS Department.
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