| Thu 8 Oct 2009, 13:01 | | SIM - Simmers - Simmers Production & Project Update For The Second Quarter Ended |
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SIM
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SIM - Simmers - Simmers Production & Project Update For The Second Quarter Ended
30 September 2009
Simmer & Jack Mines, Limited
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
Share code: SIM
ISIN Code: ZAE000006722
("Simmers" or the "company")
SIMMERS PRODUCTION & PROJECT UPDATE FOR THE SECOND QUARTER ENDED 30 SEPTEMBER
2009
Simmers announces a production update for its wholly-owned gold operations for
the quarter ended 30 September 2009, being the second quarter of the 2010 fiscal
year.
Simmers is pleased to disclose numerous positive developments on optimisation
and cost cutting initiatives at all of its major operations in the last quarter.
The key project and production highlights are as follows:
Buffelsfontein Gold Mine (BGM)
- Gold production up 5%
- Production boosting capital projects completed on time and on budget
- Cost cutting synergies identified with Tau Lekoa Mine, which is integrating
well (completion of acquisition set for Jan 2010)
Transvaal Gold Mining Estates (TGME)
- Fatality free quarter
- Rationalisation project complete - September pay-roll reduced by 53%
- Underground operations temporarily suspended in favour of mine development
- Surface projects at various stages of approval
Tau Lekoa
- Identification of R100m in synergies and cost savings per annum
- Unconditional approval for the acquisition received from Competition
Commission
- An expansion project identified at Weltevreden has the potential to double
Tau Lekoa`s Life of Mine production
Commenting on the update, Simmers CEO Gordon Miller said: "We are delighted to
have made real progress in the past quarter with our optimisation plans. We have
completed a successful rationalisation programme at TGME in Mpumalanga, and are
well along the way with the rationalisation process at BGM which will achieve
real savings. The integration of Tau Lekoa, a transforming acquisition for us,
is on track; gold production has increased at BGM and we are progressing our
surface projects at TGME."
He added: "The strong rand creates a challenging operating environment,
especially for marginal operations such as TGME and BGM and for this reason we
are pleased at the progress made with regard to cost reductions, project
development and production growth. At BGM specifically, we have completed two
key capital projects on time and within budget, both of which are aimed at
improving production and margins going forward. The restructuring at BGM has
undoubtedly been a difficult time, leading to staff retrenchment. However we
were lucky to be able to redirect many employees to Tau Lekoa as it comes online
and First Uranium`s Ezulwini Mine which is ramping up its development."
Production and project update by mine:
Buffelsfontein Gold Mine Limited (BGM)
BGM is looking positively into next year with the optimisation process and
integration of Tau Lekoa providing flexibility as BGM builds up to optimum
production levels over the next two to three years. Pleasingly production has
increased, mainly from the lower grade shafts, resulting in a 13% increase in
underground tonnage which helped to offset the impact of lower than expected
grades and contributed to a 5% improvement in gold production, from 29 571
ounces in the first quarter to 30 961 ounces in Q2FY2010.
The impact of the Mini Float Project which was commissioned in the second
quarter is evident by the 5% increase in tonnage milled from surface sources and
the 2% increase in gold recovered. The project was under budget and three months
ahead of schedule. The Mini Float allows BGM to concentrate its low grade waste
rock dumps resulting in lower treatment costs and higher margins while at the
same time allowing for full utilisation of the mine`s milling capacity.
Recoveries from surface sources as a result of the implementation of the Mini
Float project exceeded expectations and at current production rates this project
has a life of 10.4 years.
In Q3 FY2010 BGM expects to produce between 27 000 (840kg) and 28 000 ounces
(870kg) due to the rationalisation process. Costs will however be
correspondingly lower, with average cash costs for the third quarter of around
US$956/oz and R242 857 per kilogram. The full impact of the rationalisation
process and integration of Tau Lekoa will only be felt in the latter part of the
fourth quarter (March 2010) when cash costs are expected to be below R200 000
per kilogram (US$787/oz), assuming an exchange rate of R7.90 to the US dollar.
Tau Lekoa Mine
Simmers concluded a transaction in February 2009 to acquire the Tau Lekoa Mine
from AngloGold Ashanti Limited (Anglogold). The merger between Tau Lekoa and BGM
was approved by the Competition Commission on 1 September 2009 and the
finalisation of the transaction is scheduled for January 2010 subject to the
transfer of the mining rights from Anglogold to Simmers, whereupon the increase
in production ounces of some 130 000 ounces per annum is expected to position
Simmers as the fourth largest gold producer in South Africa.
In addition to providing substantial free cash inflow to BGM over the next three
years, the acquisition also includes the Weltevreden resource, a shallow, up-dip
extension of Tau Lekoa. Development of this 2.3 million ounce resource will
extend the life of the Tau Lekoa operation to 2024. Simmers has embarked on a
multistage approach to the development of the Weltevreden Project. A scoping
study for the first phase of the project was completed in September 2009; the
next stage is the pre-feasibility report which is due in mid November.
Transvaal Gold Mining Estates (TGME)
As previously announced, underground operations at TGME were temporarily
suspended in July 2009 as a result of the unusual and sustained strength of the
rand, compounded by unprecedented increases in electricity costs and mining
consumables. Having been effectively run as a trial mining project for the past
24 months, the underground operations lacked the volumes to withstand the
combination of a strong rand and rising costs. While the suspension of
underground production reduced gold output by 35%, cash costs were down
correspondingly. As a consequence, monthly cash costs are expected to fall by
40%.
Exploration development is continuing in the higher grade Frankfort B Block and
is on target for completion in April 2010.
The production profile of the company is unlikely to be dramatically affected by
cessation of underground production given that TGME only represented 6% of total
Group production in the previous financial year.
Gold production from TGME for the third quarter will be solely from surface
sources which are expected to boost TGME`s production from 2 340 ounces (72 kg)
in Q2, to between 2 890 ounces (90kg) and 3 215 ounces (100kg), at cash costs of
between US$925 and US$945 per ounce (R235 000/kg and R240 000/kg), assuming an
exchange rate of R7.90 to the US dollar.
Simmers will announce financial results for the second quarter of the 2010
financial year on or about 16 November 2009.
A detailed production and project update for the second quarter is available on
the Simmers website, at www.simmers.co.za
Gail Strauss (Communications) +27 82 936 8481
Nick Goodwin (Investor relations) +27 83 629 8605
Brunswick (on behalf of Simmers)
Itumeleng Mahabane / Clemmie Raynsford +27 11 502 7400
Johannesburg
8 October 2009
MACQUARIE FIRST SOUTH ADVISERS (PTY) LIMITED
Sponsor
Date: 08/10/2009 13:01:23 Produced by the JSE SENS Department.
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