| Mon 22 Aug 2005, 9:55 | | Aberdeen Signs Letter Of Intent With Simmers |
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Simmer And Jack Mines, Limited - Aberdeen Signs Letter Of Intent With Simmer And
Jack For A Secured Gold Royalty Based Debenture On Buffels And Harties Mines In
South Africa
SIMMER AND JACK MINES, LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
(`the Company`)
Share code: SIM
ISIN: ZAE000006722
ABERDEEN SIGNS LETTER OF INTENT WITH SIMMER AND JACK FOR A SECURED GOLD ROYALTY
BASED DEBENTURE ON BUFFELS AND HARTIES MINES IN SOUTH AFRICA
Aberdeen International Inc. (TSX Venture: AAB) has entered into a binding
letter of intent with Simmer and Jack Mines, Limited (`Simmers`), a public
company listed on the Johannesburg Stock Exchange (Share code SIM), to provide
Simmers with a loan facility of up to US$10 million to acquire the Northwest
gold assets, comprising the Buffelsfontein (Buffels) and Hartebeesfontein
(Harties) gold mines, approximately 100 km from Johannesburg, South Africa.
The two mines are commonly referred to as the Northwest operations and were in
full production until March 2005, when they were put into provisional
liquidation by the former owners, DRDGold. Simmers has entered into an Interim
Operating Agreement to treat surface material until the assets are acquired from
the provisional liquidator through a scheme of arrangement to put the
underground operations back into production.
Aberdeen has an option to convert the debt to equity at the end of the loan
period, subject to shareholders approval. Simmers` management will use its best
endeavors to obtain such approval for the conversion if exercised, failing which
a 1% Net Smelter Return (NSR) will incept for the life of the Northwest project.
The Simmers acquisition is subject to approval of all regulatory authorities in
South Africa, in particular the High Court.
Secured Gold Royalty Based Convertible Debenture, for two tranches of US$5
million, will be for a three year term, will have a 3% coupon up to US$400/oz
(2.5% thereafter) and a NSR tied to the price of gold, ranging from a 1.5% NSR
at US$450/oz to a 5% NSR at gold prices of US$700 or higher, on a graduated
scale. Included in the first tranche of US$5 million is an amount of 10 million
Rand to be advanced to Simmer & Jack on or before August 31, 2005 to assist in
securing the Northwest operations. In the event that the Northwest operations
are not successfully acquired, Simmer & Jack will pay back all funds advanced by
Aberdeen on or before December 31, 2005.
Simmers has the option of extending the term of the debenture for an additional
two years with a penalty equal to 10% of the existing principal of the Loan at
the time of the extension. Aberdeen has the option to convert the debt into
equity in Simmers shares, subject to Simmers shareholder approval, at Rand $0.80
at the end of the loan period. Simmers stock closed on Aug 15th 2005 at R0.55
per share.
Before the upside from equity or the `tail royalty`, the estimated Rate of
Return at US$450 gold on this transaction for Aberdeen is 44%. The deal is
subject to all regulatory approvals and entering into a definitive agreement
with Simmers.
The security for the debenture will be the North Plant at the Northwest
operations. This plant has a capacity of 130,000 tonnes per month and is fully
permitted and ready to go back into operation.
By providing the loan, Aberdeen will gain a right of first refusal on all future
Simmers financings involving project acquisitions and growth that require
capital. Simmers estimates that the total acquisition and start up requirements
for the Northwest operations alone will be in the order of about US$10 million.
The President of Aberdeen, Tony Wonnacott, said: `This is an exciting deal for
Aberdeen. We have downside protection with the plant as security, and a large
upside on royalty at higher gold prices. The option to convert our debt into
Simmers equity gives us further leverage to, what was once one of the best South
African gold operations. Simmers stated strategy to acquire undervalued assets
and, with a strong management team, to make them profitable, could lead to
additional transactions that would turn Aberdeen into a premier royalty company
in South Africa.`
Gordon Miller, CEO of Simmers said that the deal presented an attractive
financing option for the junior gold miner: `A loan and royalty arrangement
protects us against having to go the hedging route, as required by local
lenders, and limits the down-side, while Aberdeen and Simmers stand to benefit
substantially if the gold price goes up. This deal also raises Simmers` profile
in North America, which will be extremely useful ahead of the company`s
intention to list on the Toronto Stock Exchange (TSX),` said Miller.
Aberdeen now plans to further strengthen its board and has added Stan Bharti,
P. Eng, and Gerald McCarvill to its Board. Messrs Bharti and McCarvill have
broad international experience in turn around situations.
As co-founders of Desert Sun Mining, their experience in providing guidance to
Simmers and Aberdeen in turn around situations will be of great value to the
Board of Aberdeen.
Aberdeen will engage a special advisor from South Africa to assist with
activities in the Country.
ABOUT SIMMER & JACK
Simmer & Jack Mines, Limited (Simmers) is a gold mining company with operations
in South Africa`s North West and Mpumalanga provinces.
Established in the 1880s by mining icon Cecil John Rhodes, Simmers recently
underwent revitalization when its board was restructured in November 2004 with a
view to recapitalizing the company.
A new executive team was appointed to drive the growth potential of the company
with the aim of growing the company`s gold production profile from that of a
small, 10,000 ounce a year producer to potentially a 400,000 ounce producer over
the next three to five years.
Simmers is a black economic empowerment (BEE) company that not only meets but
exceeds the BEE ownership and control criteria of the South African Mining
Charter and the Minerals and Petroleum Resources Development Act of 2002. In
terms of a rights issue which closed on 12 July 2005, unlisted black economic
empowerment company, Jaganda, acquired 51% of the issued share capital of
Simmers, making it the first black-controlled producing gold mining company to
be listed on the JSE.
The growth of Simmers resource base will be achieved through targeted surface
and underground exploration as well as acquisition of disposals by Major gold
producers of non-core reserves in South Africa. Two current acquisition projects
include the bid for DRDgold`s former Northwest assets, as well as the former
Randfontein Estates Number Four Shaft. Simmers has had its application for new
order mining rights over the latter accepted by the Department of Minerals and
Energy. The right to mine had previously been held by Harmony Gold Mining
Company Limited, and Simmers is in the process of negotiating with Harmony to
purchase the assets and infrastructure of
Randfontein Four Shaft. This new asset is to be acquired by Ezulwini
Mining Company (Pty) Ltd (`Ezulwini`) and will be mined in terms of an agreement
between Simmers and BEE mining outfit, Waterpan Mining Consortium. Previous
owners have reported a 26 million ounce SAMREC compliant Inferred Mineral
Resource. Simmers is currently conducting a review of the Mineral Resources
contained in Main Shaft Pillar. This review has the objective of converting 2.4
million ounces of Measured and Indicated Resources, to 1.5 million ounces of
Proven and Probable Mineral Reserves by December 2005.
Simmers aims to attain low-cost producer status through the application of sound
engineering principles and a focus on short-interval controls by skilled,
experienced management familiar with the area and the assets they manage.
For more information, please visit www.simmers.co.za
ABOUT NORTHWEST OPERATIONS
Simmers is the preferred bidder for DRDGold`s former Northwest operations that
were placed under provisional liquidation in March 2005. Simmers has entered
into an Interim Operating Agreement with the joint provisional liquidators in
terms of which it will mine surface dumps, thereby generating revenue to assist
with the financing of the holding expenses until the acquisition of the company
is finalized. The company offered R45-million for the operations, which consist
of the Buffelsfontein and Hartebeestfontein Gold Mines. The previous owners of
the combined operations published SAMREC compliant measured, indicated and
inferred mineral resources of 12.1 million
ounces of gold and proven and probable reserves of 4.7 million ounces of gold.
Simmers` aim is to operate the mine for at least the next decade.
Once the final terms of the scheme of arrangement to acquire the shares in
Buffelsfontein Gold Mining Company Ltd have been finalized, the requisite
regulatory approvals will be sought.
Simmers has already got the green light from organized labour, having entered
into new, restructured conditions of employment with Solidarity, SAEWA (South
African Equity Workers Association), UASA (United Association of South Africa)
and the National Union of Mine Workers (NUM).
At its peak, the operations will provide 3 800 jobs. Simmers is confident that
it can turn the operations around by introducing strong leadership, reducing
costly corporate structures, minimizing overheads and improving production.
Additionally, Simmers intends to invest capital to ensure adequate development
and opening up takes place to support the 10 year life of mine plan.
ABOUT ABERDEEN
Aberdeen International Inc. (`Aberdeen`, or `the Company`) is a Canadian
Exploration and Royalty Company trading on the TSX Venture Exchange under the
symbol AAB. Besides Aberdeen`s intention to expand its Royalty portfolio in
addition to the loan described above, the Company also holds several prospective
exploration properties in a Canada and oil and gas interests in the United
States. One of those properties, the Indata property, located in north central
British Columbia, recently (see press release dated July 14, 2005) returned an
intercept of 154 metres grading 0.20% copper including a higher-grade intercept
of 0.37% copper over the last 24 metres. Aberdeen has an option to earn a 50%
interest in this property by making $950,000 in cumulative exploration
expenditures over a five year period. Work on the this property beginning in the
mid-1980`s has included drilling and grab sampling, including surface grab
samples of one of the showings which averaged 1.04% copper and 0.39 g/t gold.
Aberdeen International Inc. is a Canadian based company listed on the TSX
Venture Exchange under the symbol AAB.
For further information contact:
Tony Wonnacott
President
(416) 861-5879
Date: 22/08/2005 09:45:48 AM
Produced by the JSE SENS Department
