| Fri 13 Feb 2009, 7:05 | | SIM - Simmers - Results For Third Quarter Ended 31 December 2008 |
|
SIM
SIIF
SIM - Simmers - Results For Third Quarter Ended 31 December 2008
SIMMER AND JACK MINES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
Share code: SIM
ISIN: ZAE000006722
("Simmers")
SIMMERS REPORTS RESULTS FOR THIRD QUARTER ENDED 31 DECEMBER 2008
For a full discussion of the quarter`s results, please refer to the Management
Discussion and Analysis on the Company`s website, www.simmers.co.za, under
`Latest Results`.
Simmer & Jack Mines, Limited (Simmers or the Group) today announced its
financial results for the quarter ended 31 December 2008, (Q3 F2009).
Highlights
- Fatality-free quarter;
- Produced 51 570 ounces (1 604kg) of gold, of which 44 539 ounces (1
385kg) are attributable to Simmers, a 15% improvement on the prior
quarter;
- Revenues increased by 32% from R304 million to R401 million on the back
of increased production and the higher gold price received;
- Total cash unit costs for Simmers` wholly owned gold operations decreased
by 6% from R239 776/kg to R225 673/kg. In US dollar terms, total cash
costs for wholly owned gold operations reduced by 36% from US$957/oz to
US$705/oz due to the rand weakening 28% against the dollar;
- Total cash unit costs for the Group increased by 11% from R200 446/kg in
Q2 to R222 087/kg. In dollar per ounce terms however, they
decreased by 13% from US$800/oz to US$694/oz;
- Gross profit from mining activities for the Group increased by 226% from
R14.4 million to R47 million;
- Loss before interest and taxation narrowed quarter on quarter from (R73
million) to (R41.6 million);
- First Uranium Corporation received a first payment of US$50 million
following the conclusion of a gold stream transaction with Gold Wheaton
(Barbados) Corporation (GW);
- Transvaal Gold Mining Estates (TGME) produced its first gold from surface
operations in December 2008 following the successful commissioning of the
pilot heap leach pad at Elandsdrift;
- An optimisation plan was implemented at Buffelsfontein Gold Mine (BGM);
- Two-year wage agreement between TGME and the bargaining unit of the
National Union on Mine workers (NUM) successfully concluded;
- Successfully commissioned the second 50 000 tonne-per-month grinding mill
at FIU`s Ezulwini Mine;
- Technical reports for BGM, TGME, Ezulwini Mine and Mine Waste Solutions
(MWS) updated.
In Q4 F2009, the Group aims to:
- Produce 56 000 ounces of gold;
- Complete Phase 2 of the rehabilitation of BGM`s No. 5 shaft;
- Commission the No.7 shaft refrigeration plant at BGM;
- Continue low risk, low-cost production from heap leach projects at TGME;
- Remove constraints on underground production from Frankfort and Theta
Mine at TGME;
- Complete the surface bankable feasibility study for TGME;
- Complete the BIOX feasibility study for TGME;
- Commission the uranium processing plant at the Ezulwini Mine and start
delivering
yellowcake for calcining.
Gross operating profit for the quarter improved 226% from R14 million to R47
million on the back of a 15% increase in production and a favourable gold
price received. The Group produced 51 570 ounces (1 604kg) compared to 44 936
ounces (1 398 kg) in Q2 which was sold at an average price of R250 227/kg or
US$781/oz (Q2: R217 691 per kilogram and US$869/oz). This translated into gold
revenue of R401 million (Q2: R304 million), a 32 % increase on the previous
quarter.
Total cash costs for the Group increased from R283 million in Q2 to R347
million mainly as a result of inflationary pressure on mining consumables,
reagents and fuel. As a result of rand weakness against the dollar, total cash
costs decreased 13% in dollar terms, from US$800/oz to US$694/oz.
At Simmers` wholly owned gold operations - Transvaal Gold Mining Estates
(TGME) and Buffelsfontein Gold Mine (BGM) - total unit cash costs fell 6% in
rand terms and 36% in US dollar terms, from US$957/oz to US$705/oz due to
the rand weakening 28% against the dollar.
As at 31 December 2008, the Group`s reported total assets of R4.4 billion,
total liabilities of R2.4 billion and shareholders` equity of R2.1 billion. At
the end of the third quarter, the Group had cash and cash equivalents of R430
million.
Buffelsfontein Gold Mine (BGM)
BGM produced 929.95 kg (29 898 oz) during the third quarter, 3% down on Q2.
Revenues improved 13%, from R206.3 million in Q2 F2009 to R233.5 million.
BGM`s production was constrained in Q3 due to No. 2 shaft being limited to 30%
of planned output due to the completion of additional support work at the
shaft. The installation of additional supports at all pillar areas on the mine
was part of a four-month programme that began in September 2008 after an
underground employee was fatally injured in a seismic-related fall of ground
in August 2008. This programme is now complete and No. 2 shaft has been
operating at full capacity since January 2009. Prior to the incident, BGM
produced 351 kg during July 2008, which is indicative of the production
potential of the mine. With the normalising of operations, we expect output to
return to these levels during the latter part of the current quarter.
Notwithstanding the reduced production levels, BGM reported a profit before
CAPEX and taxation of R1.65 million for Q3 F2009 compared to a loss of R33.6
million in Q2 F2009. Encouragingly, BGM was cash positive in December (after
CAPEX of R5 million) and this trend is forecast to continue into the fourth
quarter.
Total cash costs per kilogram decreased 5% from R227 576/kg (US$909/oz) in Q2
F2009 to R216 145/kg (US$675/oz) in Q3 F2009. This was largely as a result of
a decrease in costs from R217.2 million in Q2 F2009 to R201.0 million in Q3
F2009. This includes the benefit of the switch from higher Eskom winter
electricity rates to summer rates in Q3 as well as cost-cutting initiatives
put in place to counter the unprecedented increase in the cost of mining
consumables.
The rehabilitation of the high grade No. 5 shaft remains on track with Phase 2
scheduled for completion at the end of next month.
Transvaal Gold Mining Estates
At TGME, the long awaited Elandsdrift heap leach pad was commissioned and the
first gold was produced in December. The production rate exceeded expectations
by 45% and came in at a total cash cost of R75 000 per kilogram, or US$230/oz
for the quarter.
The Elandsdrift project is expected to yield an additional 5 176 ounces
(161kg) of gold over the next 8 months.
Elandsdrift is one of four pilot heap leach pads that the Company plans to
commission in the next three years as part of a feasibility study to confirm
the potential for low-cost, low-risk surface mining in Mpumalanga. Production
from the four pads is expected to yield 80 000 ounces of gold over four years
at a total cash cost of between US$300 and US$350/oz. This is based on the 163
000 resource ounces which have been defined to date. Significantly more
resources are expected to be defined as further drill results from TGME`s
surface exploration programme become available.
The next heap leach pad is expected to be commissioned before the end of March
2010.
Underground production at TGME is also set to increase given the success of
recent modifications to TGME`s gold plant at Frankfort which has yielded
overall recoveries of between 60 and 65%, without the use of BIOX technology.
Since January 2007, the Frankfort Mine has been struggling to achieve viable
recoveries from its underground ore which proved more refractory than initial
test work indicated.
Research has indicated that while the introduction of BIOX technology would
increase overall recoveries to 72%, it would require a capital cost of R89
million to install.
It remains to be seen whether the ore from TGME`s two other underground
prospects at Beta and Rietfontein respond equally well to the CIL plant
modifications, and ore from Beta Mine is currently being tested in the
modified CIL plant. BIOX amenability tests are also currently being conducted
on Beta ore with Rietfontein to follow. This recovery rate is expected to
improve even further on the back of the sulphide flotation process which is
currently being introduced. At these levels, recoveries are moving closer to
what could be achieved using BIOX technology.
In total, TGME produced 3000 oz (93.33 kg) of gold in Q3, compared to 2303 oz
(71.65 kg) in Q2 F2009. While this is an improvement of 30% quarter on
quarter, it is less than expected due to mechanical breakdowns in the
metallurgical plant as well as at Frankfort Mine. This limited the production
and processing of underground ore during the quarter and plans are in place to
significantly improve plant and machinery availability to ensure production
from underground can be optimised to take advantage of the better recovery
rates.
Gold revenue for TGME increased by 54% from R15.5 million in the previous
quarter to R23.861 million in Q3 F2009 due to a favourable volume variance of
21.69kg and the higher gold price received. Total cash costs increased 4%
quarter on quarter from R28.8 million to R29.9 million. The higher volumes
decreased unit cash costs from R402 317/kg to R320 613/kg.
First Uranium Corporation
First Uranium`s results for the third quarter ending 31 December 2008 were
announced on 10 February 2009. A full analysis of the quarter and Financial
Statements can be found on the Corporation`s website, www.firsturanium.com.
During the quarter, First Uranium continued its focus on the rehabilitation
and bringing into production of the Ezulwini underground mine; the
commissioning of the Ezulwini uranium plant; the construction at MWS of the
second gold module; and the construction at MWS of the first two uranium
modules.
At Ezulwini, the delays encountered in commissioning of the gold elution
circuit during Q2 F2009 were resolved and the gold processing plant commenced
operating in October 2008, generating revenue of US$5.9 million from 6 411
ounces of gold sold at an average selling price of US$922 per ounce during Q3
F2009. During Q3 2009, the gold processing plant at Ezulwini was regarded as
ready for commercial use, notwithstanding the fact that the plant was
operating at considerably less than capacity during these early days of
production. Accordingly, from the beginning of Q3 2009, the revenues and
related costs derived from the gold processing plant were included in First
Uranium`s financial results. Prior to Q3 F2009, the costs of production from
Ezulwini were capitalized and related proceeds of sales credited against
capital. Ezulwini is still in a build-up phase of production and the shaft
refurbishment project limited the underground mining and development
activities during the quarter resulting in lower tonnages, considerably higher
unit costs and a negative margin on Ezulwini production. As a result, Ezulwini
incurred a gross loss of US$6.1 million in Q3 2009. It is anticipated that the
unit costs will decrease as the underground mining and development activities
increase.
Underground development at Ezulwini remained constrained because the majority
of shaft time availability was allocated to the shaft refurbishment project,
which was substantially completed subsequent to the end of the quarter on 7
February 2009.
MWS reported a 59% increase in revenue, quarter on quarter and achieved 94.8%
of its gold production forecast during Q3 F2009 (6% above technical report
plan published in April 2008), producing 12 235 ounces of gold at a cash cost
of US$368 per ounce. The higher average cash costs in Q3 F2008 were
attributable primarily to the high-cost mechanical load and placement
operation required to mine the remnants taken from the MWS No.2 tailings dam.
The increased revenues from continued improvement in gold production as well
as the reduction in operating costs at MWS (despite the inclusion of US$0.8
million of costs related to the Gold Stream transaction) resulted in the
significant increase in gross profit from tailings processed at MWS from
US$1.2 million in Q3 F2008 to US$5.2 million in Q3 F2009.
A gold stream transaction was concluded on 5 November 2008, in terms of which
Gold Wheaton (Barbados) Corporation (GW), a wholly-owned subsidiary of Gold
Wheaton Gold Corp., acquired the right to receive 25% of the estimated 2.1
million ounces of life-of-mine gold production from MWS. On 18 December 2008,
First Uranium received a first payment of US$50 million from GW upon
fulfilling the closing conditions of the agreement; the balance payment of
US$75 million is due on or before 12 March 2009, failing which the Gold Stream
Transaction reverts to only 10% of the life-of-mine gold production from MWS.
In addition to the total payment of US$125 million, GW will pay First Uranium
US$400 per ounce of gold delivered under the contract.
First Uranium ended the quarter with US39.0 million of cash and cash
equivalents
Post Q3
As of 11 February 2009, Simmers` holding in First Uranium Corporation
decreased from 62.3% to 53.98% following the closing of First Uranium`s bought-
deal private placement in terms of which a syndicate of underwriters agreed to
purchase 20 500 000 Units of the Company at a price of CDN$3.00 per Unit for
gross proceeds of CDN$61.5 million. Each Unit consists of one common share of
First Uranium and one-half of one common share purchase warrant, each full
warrant being exercisable to acquire one common share of First Uranium at a
purchase price of CDN$4.15 for a period of 24 months following the closing
date.
Outlook
Gordon Miller, chief executive of Simmers said that the group`s high unit cash
costs were typical of a mining company in an expansion and development phase
and that unit costs would normalise as output increased.
"Although the infrastructure is now largely in place, the volumes are not yet
there and production costs will remain high until such time as the projects
reach commercial production levels.
Once this happens though, we will be able to benefit from the economies of
scale that higher volumes bring. At Mine Waste Solutions, for example, which
is now operating at planned production levels, unit cash costs are among the
lowest in the industry," said Miller.
Gold production for the Group is set to increase by 340% over the next five
years, from 168 000 ounces in the last financial year to some 730 000 ounces,
of which half a million ounces are attributable to Simmers. First Uranium aims
to produce 1.2 million pound of uranium in its first year of production,
starting next quarter.
Conference Call
Simmers will conduct a conference call with investors to discuss the
information in this news release at 15h00 SA time, on Friday 13 February
2009. The conference call will be available simultaneously to all interested
investors and the media.
Callers may dial toll free as follows: 0800 200 648 (South Africa); 1 866 519
5086 (Canada);
1800 350 100 (Australia); 0800 917 7042 (UK) or 1800 860 2442 (USA).
Alternatively callers may dial 011 535 3600 (South Africa) and 1 412 858 4600
(USA). Normal rates will apply.
A digital replay of the call will be available one hour after the call for 72
hours. Thereafter it will be available on the Simmers website -
www.simmers.co.za. To access the replay, callers may dial + 27 11 305 2030.
Callers from the USA should dial 1 412 317 0088 and 0808 234 6771 from the UK.
Access to the replay will require the code 2544, followed by #.
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
Simmers 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 Simmers 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 Mines` expectations as at
14 August 2008; (ii) actual results may differ materially from the Mine`s
expectations if known and unknown risks or uncertainties affect its business,
or if estimates or assumptions prove inaccurate; (iii) the Mine 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 Mine 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.
For further information, please contact:
Simmers: Gail Strauss, Group Communications at +27 11 830 0390 (office), +2784
777 4060 (mobile) or gail@simmers.co.za
First Uranium: Bob Tait, VP Investor Relations at 416 342-5639 (office), 416
558-3858 (mobile) or bob@firsturanium.ca
13 February 2009
Johannesburg
Sponsor
Sasfin Capital
A division of Sasfin Bank Limited
Date: 13/02/2009 07:05:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
