| Fri 19 Feb 2010, 7:31 | | SIM - Simmers Q3 Financial Results - Shareholder Dispute Resolved Focus On |
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SIM
SIIF
SIM - Simmers Q3 Financial Results - Shareholder Dispute Resolved, Focus On
Delivering On Commitments, Quality Ounces And Profitability
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 Q3 FINANCIAL RESULTS - SHAREHOLDER DISPUTE RESOLVED, FOCUS ON DELIVERING
ON COMMITMENTS, QUALITY OUNCES AND PROFITABILITY
Key financial points:
SALIENT FEATURES
- Post quarter-end resolution of shareholder dispute and appointment of
independent board
- Cash operating profit of ZAR8 million compared to loss of ZAR29 million in
Q2 FY2010
- Produced 29,040 ounces (oz) (903 kilograms (kg)) (Q2 FY2010: 33,301 oz
(1,036 kg)
- Total cash costs decreased by 17% to ZAR230 million (Q2 FY2010:
ZAR276 million)
- Revenue down 3% to ZAR238 million (Q2 FY2010: ZAR247 million) due to
reduced ounces as a result of restructuring
- Cash and cash equivalents of ZAR739 million which excludes the
ZAR160 million credit loan facility granted to First Uranium Corporation Limited
(First Uranium)
OPERATIONAL DEVELOPMENTS
Buffelsfontein Gold production of 838.13 kg in line with guidance
Rationalisation process successfully completed
Five shaft rehabilitation project completed within budget
Tau Lekoa Period for completion of acquisition extended by six months to
September 2010
Production exceeded Simmers` planned forecasts
Simmers` team in place and shadow-managing operations in
anticipation of taking ownership
Review of economic potential of Weltevreden ongoing
TGME Excellent safety performance
Total cash costs down
Future under review
POST PERIOD-END:
Shareholder dispute resolved
New, independent board with strong mining skills appointed at general meeting of
shareholders on Monday, 1 February 2010
Formal separation of management roles at Simmers and First Uranium
Commenting on the outlook for the rest of the year, Chief Executive Officer,
Deon van der Mescht said: "The resolution of the long running dispute with
Simmers` largest shareholder and black economic empowerment (BEE) partner,
Vulisango, has created a platform to finally deliver on shareholders`
investment. The shareholder dispute has had an extremely negative effect on
employee morale. Now that it has been resolved, a major part of my role as the
newly appointed CEO will be creating an environment in which people can excel
and that will result in the achievement of goals, and ultimately the creation of
value for all stakeholders. This means going back to basics and addressing core
values around safety and well-being; costs and revenue.
"Despite a challenging period for all employees there were some positive
developments. Costs are going in the right direction and the focus at
operational level is finally beginning to shift from tonnage to grade in our bid
to mine profitable ounces, even if it means producing less gold. Buffelsfontein,
which currently produces around 92% of Simmers` gold, will see a return to
profitability in the last month of the fourth quarter, that is, March 2010,
barring unforeseen glitches.
"At TGME however, results have been disappointing. The time has come to review
the future of this operation in light of the ongoing financial losses incurred
and the capital required to realise the prospective potential of TGME. The
operation is also consuming a disproportionate amount of management time and
resources in relation to its size, and we will therefore be embarking on a
consultative process in terms of Section 189a of the Labour Relations Act to
further restructure and down-size this operation. This will allow us to focus on
regional consolidation in the North West Province which is where we believe the
best returns on our investment are to be found.
"At Tau Lekoa, we have reached agreement with AngloGold Ashanti to extend the
interim contract period to September 2010 in order to accommodate any further
delay in the permitting process. The terms of the acquisition agreement
stipulate that any cash profit earned in the interim period will be deductable
from the purchase price of ZAR600 million. The estimated cash profit for the
2009 calendar year is expected to be in the region of ZAR100 million. This cash
profit will continue to accumulate until the acquisition is completed.
The integration of Tau Lekoa into Buffelsfontein continues as planned and
Simmers, in co-operation with AngloGold Ashanti, will continue to shadow-manage
operations at Tau Lekoa until the acquisition is completed.
Post the period under review, the company initiated a separation of management
roles at Simmers and First Uranium and the Simmers board has formed an
investment committee to consider Simmers` strategic holding in First Uranium."
OVERVIEW
On Monday, 1 February 2010, shareholders voted overwhelmingly in favour of a
new, independent Board comprising significant mining expertise as well as
valuable experience in the running of a public company. The board has the
support of the company`s shareholders` including the company`s BEE partner
Vulisango. The resolution of the dispute will enable management to focus on
operational issues and commitments to shareholders, including management of
costs, increase in production of profitable ore and settlement of regulatory and
permitting issues - in particular the transfer of Tau Lekoa`s mining rights from
AngloGold Ashanti.
As expected, total gold production was down 13% to 29,040 oz (903 kg) in Q3
FY2010 as result of the shaft rationalisation process at Buffelsfontein and the
shift in focus to profitable ounces. Gold revenue was ZAR238 million, compared
to ZAR247 million in the previous quarter, while unit cash costs declined 4%
from ZAR266,345/kg to ZAR254,972/kg. Total cash costs fell by 17% to
ZAR230 million, a ZAR45.6 million improvement, quarter-on-quarter. The bottom-
line loss before taxation narrowed by 25% from ZAR147 million for Q2 FY2010 to
ZAR110 million for the period under review.
Following the first board meeting of the new Simmers board on Tuesday, 2
February 2010, the board formed an investment committee headed by deputy
chairman, Bernard Swanepoel. The committee is reviewing Simmers` holding in
First Uranium in the light of First Uranium`s disclosures regarding the change
to its production and capital schedule. The disclosures followed the withdrawal
of its environmental permit to build a tailings storage facility at its Mine
Waste Solutions project. In view of Simmers` 37% holding in First Uranium, the
company is considering ways in which it can assist its associate company,
subject to the value proposition being proven.
OPERATIONAL REVIEW
Buffelsfontein Gold Mine
Buffelsfontein produced 26,947 oz (838 kg) in Q3 FY2010, a 13% decrease on the
30,961 oz (963 kg) of gold produced in Q2 FY2010. As expected, production fell
by 13% quarter-on-quarter due to reduced tonnage as part of the shaft
rationalisation programme aimed at reducing total cash costs by suspending
production from unprofitable areas.
TGME
At TGME, gold production was down 255 oz (7.9kg) quarter-on-quarter due to the
suspension of underground operations in Q2 FY2010 and abnormally high rain fall
during November 2009 and the first half of December 2009. This resulted in
dilution of the leach pad solution and interruptions to the tramming and
crushing operations in the plant.
Tau Lekoa
As at 31 December 2009, all suspensive conditions to the acquisition, save for
the approval of the Department of Mineral Resources (DMR) for the transfer of
the applicable mining rights had been fulfilled. The application for the
transfer was submitted to the DMR in Q2 FY2009 and DMR approval is now expected
to occur during 2010. As a consequence, the parties have mutually agreed to
extend the contract period from 31 March 2010 to 30 September 2010, in order to
accommodate any further delay in the permitting process.
Weltevreden
It is anticipated that a pre-feasibility report on the Weltevreden project) will
be completed by the end of Q1 FY2011. Depending on the outcome, the pre-
feasibility report will be followed by a definitive feasibility report.
Safety
It is with sincere regret that Buffelsfontein reported the death of an employee
during the quarter. Mr Simphiwe Mbotho of Bizana in the Eastern Cape died on 16
November 2009. Simmers remains committed to zero harm and to upholding the
safest possible working environment.
OUTLOOK
In Q4 FY2010, Buffelsfontein expects to produce between 23,800 (740 kg) and
25,700 ounces (800 kg) at average cash costs of around US$1,090/oz and
ZAR270,000/kg, assuming an average exchange rate of ZAR7.70 to the US$, and also
assuming the integration of Tau Lekoa does not take place in the fourth quarter.
At TGME heavy rainfall continues to impede surface operations and will thus
result in a much lower than anticipated gold output for the fourth quarter with
correspondingly higher unit costs. As a result, the future of TGME is currently
under review.
We are confident that Buffelsfontein will show a return to profitability in the
last month of the fourth quarter (March 2010) and that renewed engagement with
the Department of Mineral Resources will help to expedite the transfer of the
Tau Lekoa mining right to Simmers. Maximising the benefit of our rationalisation
processes as well as boosting employee morale continue to be our short to mid-
term focuses.
For further information please contact:
Simmer and Jack Mines
Gail Strauss (Communications) +27 82 936 8481
Nick Goodwin (Investor relations) +27 83 629 8605
Macquarie First South Advisers
Melanie de Nysschen/Thembeka Mgoduso +27 11 583 2000
Brunswick (on behalf of Simmer and Jack Mines)
Byron Kennedy/ Clemmie Raynsford +27 11 502 7400
Johannesburg
19 February 2010
MACQUARIE FIRST SOUTH ADVISERS (PTY) LIMITED
Sponsor and Corporate adviser
Date: 19/02/2010 07:31:01 Produced by the JSE SENS Department.
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