| Mon 22 Nov 2010, 7:29 | | SIM - Simmer & Jack Mines - Announces Results for the three months ended 30 |
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SIM
SIIF
SIM - Simmer & Jack Mines - Announces Results for the three months ended 30
September 2010 and concludes $20 million loan agreement
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")
NEWS RELEASE - 22 November 2010
SIMMER AND JACK ANNOUNCES RESULTS FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2010
AND CONCLUDES $20 MILLION LOAN AGREEMENT
Salient Features:
- General safety improvement evident during the quarter ended 30 September
2010
- Acquisition of Tau Lekoa from AngloGold Ashanti concluded
- Simmer and Jack revenue increased by 106% to R327 million compared to the
R158 million reported for the quarter ended 30 June 2010
- Gold production increased 108% to 36 608 oz (1 139 kg) from 17 599 oz (547
kg) previously
- Cash operating profit of R7.9 million, compared to a loss of R52.8 million
during the previous quarter
- Cash and cash equivalents of R140 million, after settling the Tau Lekoa
purchase price
- Forward Gold Purchase loan to the value of US$20 million concluded
- Bernard Swanepoel appointed Chairman
Johannesburg: Monday, 22 November 2010 - Simmer and Jack Mines, Limited ("Simmer
and Jack" or "the Company") today announced that gold production from its Tau
Lekoa and Buffelsfontein Gold Mine ("BGM") increased by 108% for the three
months period ended 30 September 2010. The Company reported a cash operating
profit of R7.9 million, compared to a loss of R52.8 million during the previous
quarter.
Quarter-on-quarter total gold production increased from 17 599 ounces (547 kg)
to 36 608 ounces (1 139 kg). Revenue increased by 106% to R327 million, mainly
as a result of the increase in total production volume. Total cash costs
increased quarter-on-quarter by 51% from R211 million to R320 million (US$1
169/oz), essentially as a direct result of Tau Lekoa being consolidated into the
Company during the quarter.
BGM is starting to show signs of contributing positively to free cash flow as
the focus on profitable production and the control of operating costs are
becoming evident.
In July 2010, Simmer and Jack successfully concluded the acquisition of Tau
Lekoa from AngloGold Ashanti. The treatment of Tau Lekoa ore at BGM`s south
plant commenced on 1 August 2010. As a result, Tau Lekoa has been consolidated
into the Company`s results for August and September of Q2 FY2011. Integration
issues have mostly been dealt with and operationally the mine performed well
during the quarter.
Tau Lekoa`s gold production, on a full quarter-on-quarter basis, was 900 oz (28
kg) higher during the quarter, amounting to 27 263 oz (848 kg), of which BGM
accounted for 18 261 oz (568 kg). Face length increased by 774 m - ledging and
face advance improved by 0.5m, and overall yields decreased slightly from 3.4g/t
to 3.3g/t. Tau Lekoa`s total cash cost decline was maintained at 2%.
BGM`s gold production increased by 4% from 17 599 oz (547 kg) to 18 353 oz (571
kg). The average underground grade of 3.43g/t was in line with the 3.44g/t
achieved in the previous quarter. The focus on quality mining at BGM resulted in
a notable improvement in the underground recovered grade achieved towards the
end of Q2, with grades of 3.88g/t recovered during September 2010, compared to
2.97g/t during July 2010. This provides some assurance that BGM remains on track
to achieve its targeted 4g/t.
Simmer and Jack`s Interim Chief Executive Officer, Nico Schoeman said: "Efforts
to extract real synergy benefits between Tau Lekoa and BGM are ongoing, while we
have been successful in materially reducing head office and administrative costs
at Simmer and Jack".
Simmer and Jack`s capital expenditure increased from R8.6 million in the
previous last quarter to R540.3 million. This includes R501.7 million for the
Tau Lekoa purchase and post acquisition capital expenditure; as well as R1.2
million for the opening-up of new mining areas; while R1.2 million was spent in
the plant; and R2.3 million of the expenditure was safety related.
The Company also recently announced that a `Forward Gold Purchase loan` to the
value of US$20 million has been concluded with Deutsche Bank AG. ("Deutsche")
whereby Deutsche will purchase 24 360 oz of gold from the Company. Deutsche will
in terms of the agreement deposit US$20 million (less fees) to the Company,
which will be repaid over a tenure of 12 months by means of the delivery of 2
030 oz of gold per month, subject to performance and other conditions.
The proceed from the Forward Gold Purchase loan has been used to settle the
remaining R105 million of a loan, which was due to Rand Merchant Bank in terms
of a R220 million loan that was entered in 2010.
Nico Schoeman added: "This loan is a significant step forward for Simmer and
Jack as it ensures a degree of reassurance in terms of our short-term financial
security. We are by no means in a cash flow comfort zone, but this will provide
the relief required until such time as we are at our planned operating levels at
Tau Lekoa and BGM".
Following the fulfilment of the last conditions precedent to the agreement in
respect to the acquisition of Tau Lekoa from AngloGold Ashanti, an independent
expert was engaged to review the accuracy and reasonableness of the Operating
Cash Flow Account ("OCF"). Subsequent to the outcome of the review report, a
shortfall of R17.6 million was agreed to and in addition to the revenue
royalties for the period of 1 January to 30 June 2010, which amounted to R13.4
million, and other costs, resulted in a final settlement to AngloGold Ashanti of
R32 million. The agreement catered for a settlement offset of the revenue
royalty against the OCF balance. This was settled on 1 November 2010 by means of
a share issuance of 30 612 245 Simmer and Jack shares valued at R30 million, in
line with shareholder approval and the balance, which was settled in cash.
It was announced during the last quarter that the Company will dispose of
Transvaal Gold Mining Estates Limited ("TGME"), to Stonewall Mining for R25
million. Both parties are working towards fulfilling the remaining conditions
precedent by 28 February 2011. While this disposal reduces the current care and
maintenance costs, successful conclusion of the transaction will further
strengthen the Company`s cash position. More importantly it allows absolute
management focus on Simmer and Jack`s operations and the ongoing exploitation of
synergies between Tau Lekoa and BGM.
The Board of Directors has announced that Bernard Swanepoel has been appointed
Chairman of the Company.
Nico Schoeman concluded: "Our Company is starting to realise the benefits of Tau
Lekoa`s integration with BGM by means of removing certain corporate overheads
that were previously factored into the cost profile for Tau Lekoa and by
treating Tau Lekoa ore at BGM. The integration enables Simmer and Jack to spread
the operating costs over a much larger volume and share the service costs that
were previously incorporated into one operation. This integration and the
benefits derived will continue to be monitored in the coming quarters in order
to ensure that the benefits intended, are fully maximized".
Similar to the abovementioned benefits that are being realised through the
synergies in place between BGM and Tau Lekoa, it is anticipated that the
operations will benefit from a lower cost base in quarter three onwards as a
consequence of recent restructuring exercises undertaken throughout the Company.
In Q3 FY2011, BGM expects to produce some 21 000 oz (653 kg) of gold at cash
costs of approximately US$1 128/oz, at a Rand equivalent of R250 000/kg, while
Tau Lekoa expects to produce some 30 000 oz (933 kg) of gold at cash costs of
approximately US$1 007/oz, at a Rand equivalent of R215 000/kg.
Ends
For further information, please contact:
Julian Gwillim, julian@aprio.co.za
Forward-looking Information
This shareholders report and financial statements for the quarter ending 30
September 2010 contain 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 Simmer and Jack 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 Simmer and Jack 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 Group`s`
expectations as at 22 November 2010; (ii) actual results may differ materially
from the Group`s expectations if known and unknown risks or uncertainties affect
its business, or if estimates or assumptions prove inaccurate; (iii) the Group
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 Group 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.
Date: 22/11/2010 07:29:02 Produced by the JSE SENS Department.
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