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SIM
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SIM - Simmer and Jack Mines, Limited - Report for three and twelve months ended
31 March 2011(Q4 FY2011)
Simmer and Jack Mines, Limited
Incorporated in the Republic of South Africa
(Registration number 1924/007778/06)
Share code: SIM ISIN ZAE000006722
REPORT FOR THREE AND TWELVE MONTHS ENDED 31 MARCH 2011(q4 fy2011)
Salient Features:
- Simmer and Jack Mines, Limited ("Simmers" and or the "Company") and Village
Main Reef Limited ("Village") shareholders almost unanimously approves a
merger between the companies
- In anticipation of the completion of the merger with Village, Simmers is
required to account for its activities for the year to date on a
liquidation basis. This requires Simmers to account for assets and
liabilities at fair value less costs to sell. As a result Simmers impairs
the investment in First Uranium Corporation ("FIU") to market value (a
divergence from using the value in use methodology), resulting in a
R1,25 billion adjustment to the carrying value.
- Wage negotiations successfully settled with NUM, Solidarity and UASA at
Buffelsfontein Gold Mines ("BGM")
- Revenue for the quarter ended 31 March 2011decreased by 12% to
R406 million, compared to R463 million for the previous quarter
- Cash operating profit of R48.4 million compared to R86.0 million during the
previous quarter
- Gold production decreased by 15% to 41 942 oz (1 305 kg) from 49 170 oz (1
529 kg) the previous quarter
- A cash flow loss of R21.7 million was suffered during the quarter with Tau
Lekoa division ("Tau Lekoa") contributing R19.5 million, whilst BGM
incurred a cash loss of R21.9 million, resulting in positive cash flow from
operations of R2.2 million. A net cash outflow of R24.1 million relating to
the repayment of the gold forward loan to Deutsche Bank AG ("DB") on
consolidation accounts for the overall cash flow loss.
Post period-end:
- Simmers announces that all conditions to the transaction with Village is
fulfilled and that unbundling will be completed by 27 June 2011, with each
Simmers shareholder receiving 47 Village shares per 100 Simmers shares held
- Simmers changes year end from 31 March to 30 June, accordingly Simmers will
have a 15 month reporting period for this financial year and a fifth
production quarter ending 30 June 2011
- Simmers enters into a second gold forward purchase agreement with DB,
raising some USD25 million, which were used to settle the full amount, R155
million, outstanding under the ABSA domestic medium term high yield notes
("ABSA notes")
VILLAGE TRANSACTION
On 6 December 2010, Simmers and Village announced a proposed merger to create a
diversified mining company that will operate in the gold, platinum group metals,
uranium and antimony sectors (`the proposed merger").
The merger will see Village acquiring the majority of Simmers` assets, including
100% of Simmer and Jack Investments (Pty) Limited, the Company`s shareholding in
First Uranium Corporation ("FIU") and the 392 874 ZAR denominated convertible
notes issued by Mine Waste Solutions (Pty) Limited ("MWS Rand Notes"). The total
purchase price of approximately R1.3 billion is to be settled through an issue
of 598 million Village shares at a price of R2.20 per Village share and the
assumption of certain liabilities.
The Simmers and Village shareholders overwhelmingly voted in favour of the
Proposed Merger at a shareholders meeting held on the 25th of March 2011. It was
announced in the press on 9 June 2011, that all conditions to the transaction
have been fulfilled and that the unbundling will be completed by 27 June 2011.
Simmers shareholders will receive 47.3893 Village shares for each 100 Simmers
shares held at the last date to register.
STATEMENT BY THE INTERIM CHIEF EXECUTIVE OFFICER
The Company and Board extends its heartfelt condolences to the family and
friends of Mr Z Zulu, a rock drill operator who died tragically in an explosive
related injury at BGM on 17 February 2011.The Department of Mineral Resources
("DMR") halted operations in the affected area and the Section 54 notice was
lifted after four days.
The Company continues to drive the objective of no harm to all employees,
through heightened communication and specific awareness campaigns launched to
ensure safe and sustainable working conditions. The benefit of this continued
focus was evident in the safety statistics of Tau Lekoa where lost time injuries
("LTI") and reportable injuries ("RI") was reduced by 21% and 33% respectively
compared to the previous quarter. This unfortunately was not the case at BGM
where both LTI (a 70% reduction) and RI (2% reduction) figures deteriorated over
the period.
The highlight of the quarter was undoubtedly the announcement of the Proposed
Merger with Village. As indicated, this was fully supported by both sets of
shareholders, and the transaction is set to complete on
27 June 2011. This should allow Simmers and Village shareholders to capitalise
on the attractive portfolio of assets of the new merged entity.
Notwithstanding the higher gold price received during the quarter, both Tau
Lekoa and BGM did not benefit from this as production at both operations were
materially lower than during the previous quarter. As indicated in the December
2010 quarterly results announcement, production start-up post the December
holiday break was slower than anticipated, in addition to the slower start-up,
BGM production was further negatively affected by the wage negotiations that
took place during the period. We are happy that BGM has concluded the wage
negotiations with all unions, and that a two year wage settlement was agreed to.
Average underground grade delivered to the plant also decreased from
3.54 g/t in Q3 to 3.32 g/t in Q4, resulting in a 15% decrease in gold
production for the quarter, with production of 1,305 kg compared to
1,529 kg the previous quarter. Gold revenue decreased from R463 million for
the quarter ended 31 December 2010, to R406 million for this quarter. Simmers
continued the focus on reducing costs at the operations, with cash operating
cost reducing by 5% for the period, from R377 million to
R357 million and total notional costs reducing by 7% from R418 million in Q3
to R391 million in Q4.
Simmer`s operating profit from mining activities decreased to
R27.3 million from a profit of R69.0 million in the previous quarter.
Simmers accounted for the following items that impacted on the overall profit
of the company during the quarter; a downward adjustment to the fair value of
the investment in the MWS Rand Notes of R24.2 million; a fair value adjustment
to the Deutsche Bank gold forward sale loan value of R4.8 million, an equity
accounted loss on the investment in First Uranium Corporation ("FIU") resulting
from a further dilution in the shareholding in FIU, from 34.1% to 25.6%,
after FIU raised Canadian dollar 52 million during the quarter. This resulted
in a loss before taxation of
R227.3 million, compared to a profit of R204.6 million last quarter.
The results for this reporting period have been prepared on a
liquidation basis pending the conclusion of the merger transaction between
Simmers and Village. This basis of reporting required the asset, liabilities,
income and expenditures of those entities forming part of the transaction,
to be disclosed as assets available for sale and losses on non-current assets
held for sale, respectively. This basis of accounting requires that all assets
and liabilities are accounted for at fair value less costs to sell. This is
a departure from the valuation methodology applied in the previous quarters
in relation to the investment in FIU, which were accounted for on the value
in use basis. As a result of the change in the valuation basis and to give
effect to the impact of the transaction with Village, a total fair value
adjustment amounting to R1,564 billion was processed for the period,
consisting mainly of a R1,251 billion adjustment of the carrying value of
FIU to the market value thereof as at 31 March 2011. In addition to the FIU
adjustment, a loss on disposal of non-current assets held for sale of R307
million was accounted for in the Statement of Comprehensive Income. The
impact of the change in the basis of reporting is contained in the
adjustment column in table 1.
Table 1 sets out the results of the operations for the quarter and the
twelve months ended 31 March 2011.
Please visit the Simmer and Jack website (www.simmers.co.za) to view the
selected financial information contained in table 1 of the Q4 F2011 quarterly
report for the period ending 31 March 2011 listed under the Results section
of the Investor Centre.
Notes to Table 1:
1 Total cash costs are costs directly related to the physical activities
of producing gold and include mining costs, administrative costs, royalties,
on-mine drilling expenditures that are related to production and other
direct costs. Sales of by-product metals are deducted from the above in
computing cash costs. Cash costs exclude depreciation, depletion and
amortisation, corporate general and administrative expenses, exploration
costs, finance charges, and pre-feasibility costs and accruals for mine
reclamation but include central costs such as human resources and technical
services.
2 The share price of FIU deteriorated during Q4 to trade at R6.04 per share
compared to R8.65 during Q3, resulting in a fair value loss of
R24.2 million being accounted for in Q4 in respect to the MWS Rand Notes.
The abovementioned debit adjustment was increased by accounting for a fair
value loss in the Deutsche Bank Gold Forward Sale loan amounting of
R4.8 million. IAS 39requires that derivatives be carried at fair value.
The gain or loss on the change in fair value (subsequent to initial
recognition) should be recognised in the Statement of Comprehensive Income.
3 Provisions for the impairment of balances due from the Duff Scott Hospital
(Pty) Ltd and Margaret Water Company (a company registered under section 21 of
the Companies Act) amounting to R19.4 million and R3.4 million, respectively,
were raised as a result of uncertainty surrounding the recoverability of these
debts.
4 The recognition of the upcoming Village merger transaction required the
assets, liabilities, income and expenditures of those entities forming part
of the transaction, to be disclosed as assets available for sale and losses
on non-current assets held for sale, respectively. Forming part of the
accounting of this transaction, the assets necessitated fair value and
impairment considerations and resulted in an impairment, mainly relating to
the impairment of the investment in First Uranium down to market value as
at 31 March 2011.
**The results of Q4 2011 in the table above relating to the statement of
comprehensive income, include the effect of the reversal of the year`s results
by disclosing those results as losses on non-current assets for sale and losses
on discontinued operations.
Salient features on a consolidated basis (Table 2)
Please visit the Simmer and Jack website (www.simmers.co.za) to view the salient
features on a consolidated basis in table 2 of the Q4 F2011 quarterly report for
the period ending 31 March 2011 listed under the Results section of the Investor
Centre.
*Notional cash expenditure is total cash costs including all capital expenditure
Gold loan with Deutsche Bank
The Company has concluded a second Forward Gold Purchase Agreement with Deutsche
Bank A.G. whereby Deutsche Bank will purchase 64 800 oz of gold from BGM.
Deutsche Bank in terms of the agreement deposited USD25 million (less fees) to
the Company which will be repaid over a tenure of 18 months by means of the
delivery of 3 600 oz of gold per month, subject to performance and other
conditions.
TAU LEKOA
Tau Lekoa`s gold production was 14% lower, or 4 141 oz at 25 330 oz
(788 kg) compared to the previous quarter. The overall yield over the period
decreased by 5% from 3.40 g/t to 3.21 g/t. Gold output decreased due to a
decrease in the tonnage throughput resulting from the impact of the Christmas
break and public holidays as well as a DMR stoppage during February. The
decrease in yield can be attributed to lower hoisted grades achieved. The
problems areas that resulted in the lower hoisted grades have been addressed
and hoisted grades have started improving.
Face length mined over the quarter decreased with 282 metres or 11 % to
2 289 metres of mineable available face length, due to a decrease in ledging
face length. Tonnes milled and square metres mined over the period in question
decreased by 9% and 2% respectively. This is ascribable to the reduction in
production shifts during the Christmas Break.
Tau Lekoa`s gold revenue decreased by 12% from R277 million to
R245 million. This was mainly due to the lower gold production slightly offset
by a higher gold price received for the fourth quarter atUSD1 379/oz compared
to USD1 359/oz during Q3.
Total cash costs decreased by 5% from R210 million (USD1 026/oz) in the third
quarter to R199 million (USD1 121/oz) for the fourth quarter. The reduction is
largely as a result of lower metallurgical treatment cost and a reduction in
labour complement positively impacting the absolute costs. Total cash cost per
kilogram of R252 972/kg is 11% above that of the third quarter and is a direct
result of the lower production achieved during Q4.
BGM
Total gold production decreased by 16% from 19 699 oz (613 kg) in Q3, to 16 613
oz (517 kg) in Q4 FY2011. Face length decreased by 4% with face advance
decreasing by 21%. This resulted from the impact of a slow start-up following
the festive break during January as well as a fatal accident suffered at Number
7 shaft which caused this shaft to be closed for 4 production days. The impact
of the slower start up was amplified by the go-slow actions experienced during
the wage negotiations, mostly at BGM Number 6 shaft. As indicated earlier in the
release, BGM has subsequently successfully concluded wage negotiations with all
unions. Lower production resulted in a 7 534 mSquared (24%) decrease in square
meters broken resulting in underground tonnage delivered to the plant decreasing
by 16%, quarter on quarter. Underground grade decreased from 3.82 g/t in Q3
FY2011 to 3.55 g/t in Q4 FY2011.
Gold revenue decreased by 13% during the quarter, from R186 million in
Q3 FY2011 to R161 million in Q4 FY2011. Of this decrease, R29.8 million is due
to decreased volumes (3 087 oz or 96 kg less gold produced in
Q4 FY2011) while R4.8 million was due to a 3% increase in the rand gold price
per kilogram achieved.
Total cash costs decreased quarter on quarter by 5% from R167 million (USD1
222/oz) in Q3 FY2011 to R159 million (USD1 361/oz). As a result cash operating
profit at BGM reduced from R18.8 million in the previous quarter to R1.9 million
this quarter.
BGM`s capital expenditure decreased from R13.6 million in Q3 FY2011 to R9.7
million in Q4 FY2011.
TRANSVAAL GOLD MINING ESTATES (TGME)
The disposal of TGME remain subject to the fulfilment of certain conditions,
including inter alia the transfer of the mineral rights to Stonewall Mining
(Pty) Ltd by no later than 28 February 2012. TGME does not form part of the
proposed transaction with Village.
FIRST URANIUM CORPORATION (FIU)
The results for FIU, which was issued on 6 June 2011, and can be viewed at
www.firsturanium.com.
PROSPECTS
Both BGM and Tau Lekoa has continued to produce less than planned for gold
during April and May of 2011. The continued lower than planned for production
has had a negative impact on the Group`s cash flow resources. BGM management
has prepared a revised business plan that is aimed at significantly reducing
the cost base at BGM, whilst maintaining gold production at the levels achieved
over the last 5 months. This restructuring plan calls for a material reduction
in the current labour force and other costs associated with running BGM. BGM
have delivered the required notices to affected parties in terms of section
189 of the Labour Relations Act, Act 66 of 1995.In terms of the proposed
restructuring BGM is considering retrenching approximately 1200 employees of
the some 3700 workforce at the Mine. Consultation with the recognised trade
unions, the National Union of Mineworkers, Solidarity and UASA regarding the
possible retrenchments has begun and will take place over a 60 day period,
concluding on 15th August. During this process alternatives to the
retrenchments will be explored. The retrenchments will likely be
across-the-board and will affect all levels of employment at the mine.
Given the lower level of production achieved by the operations during April
and May of 2011, it is anticipated that total gold produced for the 5th
quarter will be between 1 180kg and 1 250kg.
Mineral reserves and resources
As a result of the conclusion of the acquisition of Tau Lekoa and Weltevreden
earlier in the year, a material change in the mineral reserve and resource
assets of the Simmers group is likely for the full year ending 30 June 2011.
An assessment of these assets has been performed and the updated consolidated
position together with the implications of the merger with Village, will be
included in the FY2011 annual report.
Operating and financial results - table 3
Please visit the Simmer and Jack website (www.simmers.co.za) to view the
operating and selected financial results contained in table 3 of the Q4 F2011
quarterly report for the period ending 31 March 2011 listed under the Results
section of the Investor Centre.
CEO Tele-conference call
20 June 2011 16:00 GMT+2)
Live Call Access Numbers
South Africa - Johannesburg +27 11 535 3600
UK (Toll-Free) 0 800 917 7042
USA (Toll) +1 412 858 4600
South Africa - Cape Town +27 21 819 0900
South Africa - Durban +27 31 812 7600
South Africa (Toll-Free) 0 800 200 648
Australia (Toll-Free)1 800 350 100
Other Countries (Intl Toll) +27 11 535 3600
Canada (Toll-Free) 1 866 605 3852
USA (Toll-Free) 1 800 860 2442
Playback Access Numbers
South Africa +27 11 305 2030
USA and Canada (Toll) +1 412 317 0088
SIMMER AND JACK MINES, LIMITED
Incorporated in the Republic of South Africa
(Registration number 1924/007778/06)
Share code: SIM ISIN ZAE000006722
Johannesburg
20 June 2011
Transfer secretaries
South Africa
Computershare Investor Services (Pty) Ltd
Ground Floor, 70 Marshall Street, Johannesburg, 2001, Republic of South Africa
United Kingdom
Capita Registrars
The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom
Auditors
Grant Thornton
Registered Office
Isle of Houghton, Harrow Court 3, 13 Boundary Road, Houghton Estate,
Johannesburg, 2198, Republic of South Africa
Sponsor
RAND MERCHANT BANK (A division of First Rand Bank Limited),1 Merchant Place,
Corner Fredman and Rivonia Road, Sandton, 2146
The financial statements have been prepared in accordance with International
Accounting Standard (IAS 34) Interim Financial Reporting.
Date: 20/06/2011 07:05:04 Produced by the JSE SENS Department.
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