| Wed 21 Jul 2010, 7:30 | | SIM - Simmer & Jack Mines Limited - Simmers gets mining rights for TAU Lekoa |
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SIM - Simmer & Jack Mines, Limited - Simmers gets mining rights for TAU Lekoa
Mine (Acquisition Concluded)
Simmer & Jack Mines, Limited
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
Share code: SIM
ISIN Code: ZAE00006722
("Simmers" or "the Company")
SIMMERS GETS MINING RIGHTS FOR TAU LEKOA MINE (ACQUISITION CONCLUDED)
Simmers is pleased to announce that the Department of Mineral Resources has
transferred the Mining Rights for the Tau Lekoa Mine from AngloGold Ashanti
to Buffelsfontein Gold Mines Limited, a wholly-owned subsidiary of Simmers.
With the registration of the transfer of the mining rights, being the final
condition precedent in terms of the sale and purchase agreement between
Simmers and AngloGold Ashanti, full ownership of Tau Lekoa and the adjacent
properties of Weltevreden and Goedgenoeg will pass to Simmers from 1 August
2010.
Simmers entered into an agreement with AngloGold Ashanti in February 2009 to
acquire Tau Lekoa and the adjacent properties of Weltevreden and Goedgenoeg
for a total purchase consideration of:
- R600 million (payable at completion of the transaction and adjusted as set
out below); and
- a royalty of 3% of the net revenue (gross revenue less state royalties)
generated by the Tau Lekoa mine and any operations developed at Weltevreden
and Goedgenoeg. The royalty is payable quarterly for each quarter commencing
1 January 2010 until the total production from Tau Lekoa, Weltevreden or
Goedgenoeg upon which the royalty is paid is equal to 1.5 million ounces and
provided that the average quarterly rand price of gold is equal to or exceeds
R180 000/kg (in 1 January 2010 terms).
Full details of the agreement were published on SENS on 18 February 2009.
In terms of the agreement Simmers will settle the purchase price of R600
million as follows:
- R450 million in cash, presently held in guarantee with a financial
institution on behalf of AngloGold Ashanti; and
- the remaining R150 million in cash or in Simmers shares. This remaining
amount is subject to an offset adjustment based on the free cash flow
generated by Tau Lekoa between 1 January 2009 and 31 July 2010, inclusive of
the royalty payable from 1 January 2010 to 30 June 2010. This offset
adjustment, is payable by Simmers to AngloGold Ashanti, subject to a final
audit of the July 2010 production figures to take place within 45 days of the
closing date of 16 August 2010.
Commenting on the outcome, Simmers` interim CEO Nico Schoeman said: "The
conclusion of this deal is a turning point for the Company. It`s the first
strategic step in transforming Simmers into a company capable of sustaining
healthy profitability, given that Tau Lekoa is capable of generating positive
free cash flow from the outset. Equally important is the substantive impact
that this acquisition will have on the risk profile of Buffelsfontein Gold
Mine".
"By leveraging off the benefits of shared metallurgical processing and
services costs, we are targeting a cost saving of R100 million over the next
12 months, which will contribute significantly towards returning
Buffelsfontein to profitability."
Schoeman said that the handover process, which had commenced in September
last year, had gone smoothly, with Simmers shadow-managing the AngloGold
Ashanti Tau Lekoa team.
Tau Lekoa is expected to produce an annualised 125 000 oz (3 888 kg) of gold
at a total cash cost of around US$815/oz or R200 000/kg, which is expected to
generate an average, annualised free cash flow of R150 million in the first
year.
"We will begin treating the ore from Tau Lekoa at Buffelsfontein Gold Mine`s
gold plant with effect from 1 August 2010. In the first month we will have to
account for the gold lock-up in the plant as a result of the higher gold
grades of Tau Lekoa ore fed through the plant. We expect to see the full
benefit in terms of free cash flow from September onwards.
"The acquisition will transform Simmers from a marginal, junior miner into a
mid-tier gold producer. It provides cash flow, scale and substance to our
current gold business as well as the potential for upside via the development
of Weltevreden and Goedgenoeg, two expansion projects which could extend the
life of Tau Lekoa by some 14 years," said Schoeman.
Cautionary Language Regarding Forward-Looking Information
This news release contains forward-looking information based on current
expectations. All other statements other than statements of historical fact
included in this release are forward-looking statements (or forward-looking
information) and have not been reviewed and reported on by the Company`s
auditors. No assurance can be given that the transactions contemplated
herein will be concluded. The Company`s plans involve various estimates and
assumptions and its business and operations are subject to various risks and
uncertainties. These forward-looking statements are made as of the date
hereof and there can be no assurance that such statements will prove to be
accurate. Such statements are subject to significant risks and uncertainties,
and actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements.
21 July 2010
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
For further information please contact:
Investors:
Nick Goodwin - nick@simmers.co.za
+27 83 629 8605
Media:
Gail Strauss - gail@simmers.co.za
+27 82 936 8481
Date: 21/07/2010 07:30:01 Produced by the JSE SENS Department.
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