| Wed 22 Jul 2009, 17:04 | | SIM - Simmers - TGME Commences Optimisation Programme On Underground Operations |
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SIM - Simmers - TGME Commences Optimisation Programme On Underground Operations
Simmer & Jack Mines, Limited
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
Share code: SIM
ISIN Code: ZAE000006722
("Simmers")
TGME COMMENCES OPTIMISATION PROGRAMME ON UNDERGROUND OPERATIONS
Transvaal Gold Mining Estates Limited (TGME or the mine), a wholly-owned
subsidiary of Simmers, has issued a Section 189(a) Notice to organised labour in
terms of which the mine will begin a consultation process aimed at closing the
underground division of TGME until such time as its low-cost, high-margin
surface projects can be commissioned. It is anticipated that some 271 jobs in
the Pilgrim`s Rest region will be affected by the process.
Simmers announced in January 2007 that TGME had embarked on a project to pursue
surface mining opportunities in the Pilgrim`s Rest/Sabie goldfields using low-
risk, low-cost heap leach technology to extract the extensive low-grade surface
deposits in the area. As part of the project, four pilot heap leach pads were
envisaged to test the technology on various surface targets identified in the
region.
The mining right application for the first pad at Elandsdrift was submitted in
November 2006 with the aim of commissioning in October 2007. Delays in the
permitting process however meant that the pad was only commissioned a year later
in October 2008. Although the mining right was finally approved in March 2008,
it took an additional six months to obtain the Water Use Licence, a hiatus that
cost TGME approximately 65 high-margin kilograms (2090 ounces) of gold in the
2009 financial year. This equated to a loss of revenue in the order of R18.5
million.
The three remaining heap leach pads, namely the Hermansburg Pad in the Molototse
Valley near Frankfort mine, Glynns Lydenburg pad in Sabie and a pad to test the
characteristics of the Pilgrim`s Trend Deposits (PTDs), have also been in the
pipeline since 2007 and are at various stages of the permitting process. In
total, the four pads are expected to produce 2 595 kgs (83 430 ounces) at a
total cash cost of R55 800/kg ($217/oz), assuming an exchange rate of R8 to the
US dollar. This is based only on the current resources and excludes resources
that may be added as a result of ongoing exploration in the province.
"The commissioning of the surface projects was timed in such a way as to
subsidize the underground mining at TGME during the trial mining phase," said
Deon van der Mescht, managing director of Simmers` gold operations.
"The complexity of the permitting process has led to significant delays and in
the current poor market conditions we can no-longer justify running the
underground operations at a loss whilst there is uncertainty as to when we can
expect to get the surface operations to deliver at planned volumes."
TGME`s underground operations comprise the Frankfort and Theta mines, with two
other potential targets at Rietfontein and Beta. Since Frankfort was re-opened
in 2006, the refractory nature of the underground ore meant that only a limited
amount of gold could be recovered using the conventional CIL plant. Although
plant modifications have improved recoveries from their initial 40% to over 66%,
tests have shown that it is possible to achieve recoveries of 72% using
bioxidation technology (BIOX). In order to justify the capital outlay required
to construct a BIOX plant, ore from other potential underground targets has also
had to be tested for BIOX amenability.
"As a result of these issues, TGME`s underground operations have up until now
been run on a trial mining basis and have incurred very high cash costs. In the
current market conditions we cannot afford for any operations not to be cash
flow positive and it is against a scenario of rising costs and a much stronger
than expected rand/dollar exchange rate, that we have taken the decision to
conserve cash and rationalise the operation until such time as we are able to
produce the volumes to make it profitable. These volumes relied on a much faster
roll-out of the surface operations using heap leach technology and this has just
not happened," said van der Mescht.
Heap leach technology is relatively new in South Africa, although the method is
widely used in Australia and America to successfully recover gold from low-grade
deposits in an environmentally responsible manner. The environmental impact
assessment (EIA) studies are therefore of paramount importance to the permitting
process, but successive requests for additional specialist studies have
continually delayed the roll-out of the project.
Since 2007 TGME has demonstrated its commitment to sustainable environmental and
social development by commissioning over 30 bio-physical and social specialist
studies around surface projects in Mpumalanga, arising from issues raised by
authorities and interested and affected parties.
"TGME has shown that it is fully committed to the responsible development of its
surface projects and has gone to significant lengths to allay environmental
concerns about this new technology. We believe that it is possible to exploit
these deposits in such a way as to spread significant economic benefits to many
people in this region without harming or despoiling the environment.
"In fact we have thus far used the process to clean up portions of the legacy of
old mining operations discontinued generations ago. We have shown our
willingness to engage constructively and openly with those parties who are
concerned about these matters, but the lack of a defined period in which to
address such concerns makes it impossible to continue the funding on an open-
ended basis.
"Additionally, the backlog of applications awaiting processing by regional
offices of the Department of Minerals means that it is not always possible to
rely on the time-frames as set out in the Mineral and Petroleum Resources
Development Act.
"The combined effects of the delays therefore mean that we must sacrifice the
underground operations and the jobs in order to keep the prospects of the
surface deposits alive," said van der Mescht.
Underground operations will not cease entirely as the development of the high
grade B Block at Frankfort will continue. TGME currently employs some 560
people, including contractors, of which 271 are employed in the underground
division.
Van der Mescht added that since the Group was in an extensive build-up phase at
its other operations, it was hoped that alternative employment could be found
within the Group for the TGME employees affected by the process.
22 July 2009
ABOUT SIMMERS
Simmer & Jack is a gold and uranium miner focused on the development and
expansion of surface and underground operations in South Africa. These include a
37% stake in TSX and JSE-listed First Uranium Corporation which is aiming to
become a significant low-cost producer through the re-opening and underground
development of the Ezulwini Mine and the expansion of the Mine Waste Solutions
tailings recovery operation.
Simmers` has two wholly-owned gold operations: Buffelsfontein Gold Mines Limited
in the North West Province and Transvaal Gold Mining Estates Limited (TGME) in
the Pilgrim`s Rest /Sabie gold field. Simmers entered into an agreement with
AngloGold Ashanti on 17 February 2009 to purchase 100% of the Tau Lekoa mine,
situated 12km`s from Buffelsfontein Gold Mine. The deal is subject to certain
conditions precedent and is expected to close on 01 January 2010.
For further information please contact:
Nick Goodwin
Investor Relations Executive
+27 83 629 8605 or nick@simmers.co.za
Gail Strauss
Communications
+27 82 936 8481 or gail@simmers.co.za
Date: 22/07/2009 17:04:38 Produced by the JSE SENS Department.
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