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Simmer And Jack Mines Limited - Abridged Consolidated Interim Results for the
six months ended 30 September 2005
SIMMER AND JACK MINES LIMITED
Incorporated in the Republic of South Africa
(Registration number 1924/007778/06)
Share code SIM ISIN ZAE000006722
("the Group") or ("the Company") or ("Simmers")
ABRIDGED CONSOLIDATED INTERIM RESULTS for the six months ended 30 September 2005
- Successful rights issue concluded
- Loan of US$10 million finalised with Aberdeen
- Buffelsfontein mine acquired from DRDGold
- Year-on-year share price increase of 168%
- BEE partners introduced
Consolidated Income Statements
Unaudited Unaudited Audited
six months restated six restated
twelve
ended months to months to
30 September 30 September 31 March
2005 2004 2005
Notes R000 R000 R000
Revenue 13 291 20 394 30 887
Cost of sales (19 692) (23 782) (37 802)
Loss from (6 401) (3 388) (6 915)
mining
activities
Amortisation (5 405) (4 075) (6 943)
and
depreciation
Management fee 4 14 789 - -
received
Exploration (8 326) (4 064) (11 518)
and corporate
expenditure
Loss from (5 343) (11 527) (25 376)
operations
Profit/(loss) 5 3 086 (14 683) (14 683)
on disposal of
subsidiary
Interest 301 34 65
received
Finance (333) (4 135) (8 665)
charges
Loss on
ordinary
activities
before taxes
and
minority (2 289) (30 311) (48 659)
interest
Taxation - - -
Minority 374 - -
interest
Loss for the (1 915) (30 311) (48 659)
period/year
Reconciliation
between loss
and headline
loss:
Basic loss for (1 915) (30 311) (48 659)
the
period/year
Add back:
Profit/(Loss) (3 086) 14 683 14 683
on disposal of
subsidiary
Headline loss (5 001) (15 628) (33 976)
for the
period/year
Consolidated Balance sheets
Unaudited Unaudited Audited
six months restated six restated
twelve
ended months to months to
30 September 30 September 31 March
2005 2004 2005
Notes R000 R000 R000
ASSETS
Non-current 57 147 31 435 32 386
assets
Mining assets 6 56 804 31 341 32 184
Other assets 343 94 202
Current assets 50 861 2 849 3 606
Loan receivable 7 38 128 - -
Other current 10 633 2 752 3 085
assets
Cash and cash 2 100 97 521
equivalents
108 008 34 284 35 992
EQUITY AND
LIABILITIES
Equity capital
and distributable
reserves/
(accumulated 60 830 (33 814) (48 089)
loss)
Shareholders" 64 290 (33 815) (48 090)
interest
Minority (3 460) 1 1
shareholders"
interest
Non-current 24 860 463 1 000
liabilities
Loan payable 8 23 860 - -
Other non-current 1 000 463 1 000
liabilities
Current 22 318 67 635 83 081
liabilities
Other current 22 093 4 080 6 083
liabilities
Shareholders" - 63 555 76 152
loans
Loan payable 8 225 - 846
108 008 34 284 35 992
Ordinary shares 741 184 215 432 224 942
in issue ("000)
Treasury shares - (21 500) (11 990) (21 500)
Share Incentive
Trust ("000)
Adjusted shares 719 684 203 442 203 442
in issue at year-
end ("000)
Weighted average 370 063 203 442 203 442
number of shares
("000)
Loss per share (0,52) (14,07) (22,50)
(cents)*
Diluted loss per (0,50) (0,14) (0,22)
share (cents)*
Headline loss per (1,35) (7,25) (15,71)
share (cents)*
Diluted headline (1,41) (0,07) (0,15)
loss per share
(cents)*
* Based on
weighted average
number of shares
in issue ("000) 370 063 203 442 203 432
Net 0,16 (0,17) (0,24)
asset/(liability)
value per share
(cents)
Consolidated statements of changes in equity
Treasury Distributable
shares - Fair reserves/
Share value (Accumu-
Share Share Incentive and lated
other
capital premium Trust reserves loss) Total
R000 R000 R000 R000 R000 R000
Balance 4 309 106 541 (1 199) 160 (113 315) (3 504)
at 1
April
2004
Net loss (30 311) (30
for the 311)
six
months
Balance
as at 30
September
2004 4 309 106 541 (1 199) 160 (143 626) (33
815)
Net loss (18 348) (18
for the 348)
six
months
Treasury 190 2 188 (2 378) -
shares
sold
Share- 4 073 4 073
based
payments
Balance
as at 31
March
2005 4 499 108 729 (3 577) 4 233 (161 974) (48
090)
Shares
issued in
terms of
rights 10 325 118 735 129 060
offer
Expenses
written
off
against (1 481) (1 481)
share
premium
Net loss (1 915) (1 915)
for the
six
months
Movement
i.r.o.
fair
valuation
of loan (13 (13
786) 786)
Treasury 196 4 998 (5 194) -
shares
sold
Share- 502 502
based
payments
Balance
as at 30
September
2005 15 020 230 981 (8 771) (9 051) (163 889) 64 290
Consolidated cash flow statements
Unaudited Unaudited Audited
six months restated six restated
twelve
to months to months to
30 September 30 September 31 March
2005 2004 2005
R000 R000 R000
Cash from/(utilised 7 959 (5 870) (9 821)
in) operations
Income received 301 34 65
Finance charges (35) (130) (149)
paid
Cash flows 8 225 (5 966) (9 905)
from/(to) operating
activities
Cash flows to (68 294) (652) (4 676)
investing
activities
Cash flows from 61 648 5 700 13 783
finance activities
Net 1 579 (918) (798)
increase/(decrease)
in cash and cash
equivalents
Cash and cash 521 1 015 1 319
equivalents at
beginning of year
Cash and cash 2 100 97 521
equivalents at end
of period/year
Notes to the financial statements
1 ACCOUNTING POLICIES
1.1 Basis of preparation
The Group has adopted International Financial Reporting Standards ("IFRS") for
the year ending 31 March 2006. These Interim Financial Statements have been
prepared in accordance with International Accounting Standard ("IAS") 34,
Interim Financial Reporting, and are covered by IFRS 1 - First time adoption of
IFRS.
The Company has made use of the exemption available under IFRS 1 to only apply
IAS 32 and IAS 39 from 1 March 2005.
1.2 Share-based payments
The Company has changed its accounting policy with regard to share-based
payments to comply with IFRS 2. Costs associated with share-based awards to
employees and non-executive directors under the share option scheme are now
charged to the income statement over the vesting periods. The cost is determined
by using independent valuations of the share options.
2 TRANSITION TO IFRS
The Company"s financial statements for the year ending 31 March 2006 will be the
first annual financial statements that comply with IFRS. The Company"s
transition date is 1 April 2004. In preparing these interim financial
statements, the Company has applied certain of the optional exemptions from full
retrospective application of IFRS.
Exemptions from full retrospective application:
- Exemption from restatement of comparatives for IAS 32 and IAS 39
Share-based payment transaction exemption
The Company has elected not to apply IFRS 2 to share options granted prior to 7
November 2002 that had not yet vested by 1 March 2005. The Company has elected
to apply the share-based payment exemption. It applied IFRS 2 from 1 April 2004
to those options that were issued after 7 November 2002 but that had not vested
by 1 April 2004.
3 RECONCILIATION BETWEEN IFRS AND GAAP INCLUDING OTHER PRIOR YEAR ADJUSTMENTS
The following reconciliation provides a quantification of the effect of the
transition to IFRS on equity and net income in terms of the items referred to 2
above as well as the effect of other prior year adjustments:
1 Apr 2004 30 Sep 2004 31 Mar 2005
R000 R000 R000
Reconciliation
of equity:
Equity as 5 582 (8 419) (34 922)
previously
reported in
terms of GAAP
IFRS reconciling
items
- Share-based 160 160 4 233
payment reserves
- Movement in
distributable
reserves as a
result
of fair value of (9 086) (11 203) (17 241)
mining assets
Other prior year
adjustments not
related to IFRS
- Net effect of
disposal of
Mimco not taken
into account
in the September (14 193)
2004 interim
results
- Change in
accounting
policy in
respect of share-
based
payments (160) (160) (160)
Equity as (3 504) (33 815) (48 090)
reported in
terms of IFRS
Reconciliation
of loss:
Net income as (14 001) (40 504)
previously
reported in
terms of GAAP
IFRS reconciling
items
- Movement in
distributable
reserves as a
result
of fair value of (2 117) (4 082)
mining assets
- Share-based (4 073)
payments
Other prior year
adjustments not
related to IFRS
- Net effect of
disposal of
Mimco not taken
into
account in the (14 193) -
September 2004
interim results
Net loss as (30 311) (48 659)
reported in
terms of IFRS
4 MANAGEMENT FEE RECEIVED
In July 2005, Simmers entered into an interim agreement with the provisional
liquidators of Buffelsfontein Gold Mines Limited ("Buffelsfontein"). In terms of
the agreement, Simmers took over the surface operations of Buffelsfontein and
received a management fee in return, based on the profit made on the surface
operations.
The interim agreement terminated on 20 October 2005, the date the High Court had
sanctioned Simmers" bid to acquire Buffelsfontein from the provisional
liquidators.
5 PROFIT/(LOSS) ON DISPOSAL OF SUBSIDIARY
At the beginning of the year Simmers disposed of 26% of its shareholding in
Sabie Mines (Pty) Limited ("Sabie Mines") to Mining Reclamation & Supports (Pty)
Limited ("MRS"), a BEE company, which resulted in a profit on disposal of R3,1
million.
The R14,7 million loss incurred in the six months ending 30 September 2004
relates to the disposal of Makonjwaan Imperial Mining Company (Pty) Limited
("Mimco") and its subsidiaries on 31 August 2004.
MINING ASSETS
30 Sep 2005 30 Sep 2004 31 Mar 2005
R000 R000 R000
Balance at 32 184 52 793 52 793
beginning of the
year
Additions 30 000 3 510 7 228
- Capitalised 9 759 3 190 6 394
development cost
- Capitalised 362 - -
mineral rights
cost
- Metallurgical - 320 320
plant
- Underground 19 851 - 301
equipment
- Motor vehicles - - 64
- Computer 28 - 149
equipment and
software
Disposal of - - (8)
assets
Disposal of - (20 887) (20 887)
Mimco
Amortisation (5 380) (4 075) (6 942)
charge for the
period/year
Balance at end 56 804 31 341 32 184
of the
period/year
7 LOAN RECEIVABLE
Simmers paid Buffelsfontein"s holding costs of more than R38 million in terms of
the interim agreement with the provisional liquidators. Simmers will offset up
to R20 million of its contribution to holding costs against the proposed payment
of R45 million to the provisional liquidators on 20 October 2005, the effective
date of acquisition.
8 LOAN PAYABLE
Simmers entered into an agreement with Aberdeen International Incorporated
("Aberdeen"), a Canadian Exploration and Royalty Company trading on the TSX,
whereby Aberdeen provides a loan facility of up to US$10 million to acquire
Buffelsfontein. At 30 September 2005, Aberdeen has provided US$1 586 330 (R10
million). The loan has a 3% coupon up to US$400/oz (2,5% thereafter) and a Net
Smelter Return ("NSR") on Buffelsfontein"s gold production only, 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/oz or higher, on a graduated scale.
Simmers has the option of extending the term of the loan 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 R0,80 per share
after the one-year anniversary of the loan. The loan has a three-year term.
Simmers" share price at 30 September 2005 was R0,75 per share. No value has been
placed on the option as it is considered to be immaterial to the financial
statements of the Company.
The loan will be secured with an immovable bond over Buffelsfontein"s North
Plant.
9 COMMITMENTS
30 Sep 2005 30 Sep 2004 31 Mar 2005
R000 R000 R000
Authorised
capital
expenditure
- Contracted 7 831 - 1 325
- Not yet 2 859 - 7 916
contracted for
10 690 - 9 241
10 NON-CURRENT LIABILITIES
Simmers is currently negotiating the value of the Environmental Rehabilitation
Provision and will adjust it accordingly once agreement has been reached with
the DME.
11 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
Related parties
Related parties where control existed during the year under review were as
follows:
Shareholders: Consolidated Mining Management Services Limited ("CMMS")
Amount owed to related party
30 Sep 2005 30 Sep 2004 31 Mar 2005
Related party R000 R000 R000
transactions
Consolidated
Mining
Management
Services Limited - 63 555 76 081
Until the exercise of the rights issue in July 2005, CMMS was the major
shareholder of Simmers and the funder of the Simmers operations. The rights
issue enabled Simmers to repay the CMMS loan, thereby eliminating its debt at
that time, acquire funding for its capital requirements and replace CMMS with
new shareholders.
12 DIVIDENDS
The Board has resolved not to declare any dividends to shareholders for the
period under review.
13 SHARE PRICE
30 Sep 2005 30 Sep 2004 31 Mar 2005
Cents per share 75 28 50
% increase 168% Base price 79%
COMMENTS
The rights offer exercised in July 2005 was successfully taken up by 91% of the
shareholders. The R129 million raised was used to settle the shareholders" loan
and to revitalise and expand the mining operations in Pilgrim"s Rest and Sabie.
The rights issue enabled Simmers to continue as a going concern.
The Company"s headline loss per share for the six months ending 30 September
2005 is 1,35 cents, an 81% decrease from the 7,25 cents headline loss per share
for the six months ending 30 September 2004. The decrease is mainly a result of
the management fee received in respect of the surface operations at
Buffelsfontein and the decrease in interest paid subsequent to the settlement of
the shareholders" loan.
There was a 100% increase in the Company"s exploration and corporate
expenditure. This increase is the result of a range of actions taken at
operational level such as restructuring the management and Board of the Company
and costs relating to the development of additional gold resources.
As indicated on SENS and in the press on 27 October 2005, Simmers appointed four
additional independent non-executive directors in keeping with good governance
structures as per the guidelines set in the King II Report.
OPERATIONS REVIEW
TGME was the only operating asset at the beginning of the year. For the period
under review TGME produced 60 257 ROM tonnes, an increase of 120% over the
equivalent period for 2004, and milled 17 297 tonnes (a 60% increase) with a
yield of 8,55 g/t (a 33% decrease) to produce 147,9 kg gold (an 8% increase).
The average gold price received was 9% higher at 90 462 per kg generating
revenue of R13,3 million. Operating costs increased by 60% to R19,7 million,
which is in line with increased production. R9,8 million was spent on ore
reserve replacement development and all of the above expenditure was incurred to
rightsize the mine for its planned production expansion and an improvement in
production is expected for the remaining six-month period.
TGME submitted an application to the Department of Mineral and Energy ("DME")
for new order mining rights for the Dukes Hill, Beta and Frankfort mines. With
the subsequent submission of Environmental Management Programmes ("EMPs"),
Environmental Impact Assessments ("EIAs"), Social and Labour Plans, etc, the
Company expects a successful transfer of rights by February 2006. Unfortunately,
this process, which included the application for prospecting rights on a number
of the Sabie Mines properties, is a lengthy one and thus limited mining
operations to the Dukes Hill mine only during the review period and has delayed
the commencement of development of new mining infrastructure by one year. This
constraint will remain until such time as the mining and prospecting rights are
issued.
On 13 July 2005, Buffelsfontein commenced treatment of surface material in
accordance with an interim operating agreement entered into with the provisional
liquidators. The interim agreement was the result of Simmers being nominated the
preferred bidder for these assets and the forerunner to acquiring them through a
scheme of arrangement. The surface operations delivered 309 165 tonnes milled at
an average grade of 1,44 g/t producing 446,5 kg gold, generating revenue of
R41,2 million against cash operating cost of R26,4 million. On 20 October 2005
the High Court ruled in favour of Simmers acquiring Buffelsfontein. This is a
major acquisition for the Group and will add significant value for shareholders.
In addition, there is considerable upside in the uranium with good gold
production credits from both surface and underground sources.
Simmers, in keeping with its acquisition strategy, submitted an application for
the Mining Rights at the No 4 Shaft of Randfontein Estates Limited ("REL"),
currently owned by Harmony Gold, in May 2005. The application was accepted and
subsequently the EMP, EIA, Social and Labour Plan, etc, have been submitted to
the DME and the expectation is that a mining right should be awarded by the end
of January 2006. At the end of September 2005, Simmers entered into an interim
agreement with REL, whereby Simmers will pay the pumping costs for a minimum
period of four months to end January 2006. During this period Simmers will
convert its pre-feasibility study to a bankable status by the end of February
2006.
Subsequent to obtaining the mining right, Simmers will conclude an acquisition
agreement with REL to acquire the asset. The mine will be named Ezulwini to be
operated in a joint venture with Waterpan Mining Consortium, a BEE company, who
will have a 10% interest in the mine and will operate it in accordance with an
operating agreement. The initial target for this acquisition is to mine an
estimated 1,5 million ounces of high grade gold from the main shaft pillar.
While the pillar remains the focus of the current feasibility study, there is
significant upside in this project for additional gold and uranium mining.
Extensive geological exploration on all operations has commenced to
significantly increase the mineral resource base.
PROSPECTS
In the period under review, we have focused on a number of acquisition
opportunities involving significant gold resources that became available in an
environment where a number of South African gold mines were struggling to
survive. Buffelsfontein and Hartebeesfontein mines, collectively named
Buffelsfontein, have been acquired, following the provisional liquidation of
those mines by DRDGold Limited. We were able to access those mines during the
liquidation process and, once our offer became unconditional, were able to take
control of the situation and managed the mine on behalf of the liquidators. As a
result, the transition has gone well, thanks to a proactive approach and a well-
prepared mine management team. With the build-up in underground production, we
are increasing our labour complement and will reach the projected labour force
of 3 600 by mid-2006. Of critical importance is ensuring that safe working
conditions are maintained and safe access to the abandoned workings created. The
enthusiasm of the workforce, who has been given renewed opportunity to bring the
mines to their full potential, has been a hugely significant factor in
delivering the positive results shown to date.
The build-up to the forecast annual production rate of 220 000 ounces is on
track. Considering that figure was based on a forecast gold price of R85 000 per
kg versus the current price which is in excess of R100 000 per kg, we have every
reason to believe that the acquisition and restructuring of Buffelsfontein will
prove to be of tremendous value to Simmers for many years to come.
As announced in the press, the Company has commenced an evaluation of the
uranium potential of Buffelsfontein. Both Buffelsfontein and Hartebeesfontein
were significant uranium producers in the past, but ceased operations when the
uranium market deteriorated in the nineties when the spot uranium price fell to
a fraction of its current value. Both uranium plants were scrapped, but the ore
from which uranium was extracted continued to be mined for gold, with the
uranium content reporting to the tailings dams. Since taking over, Simmers has
drilled the tailings dams, and we believe that they may contain sufficient
quantities of uranium to justify the establishment of a uranium and gold
production facility to treat the surface resources separately. As a result we
have commissioned a feasibility study on the uranium potential, and preliminary
results are expected in the first quarter of 2006. Funding arrangements for
refurbishment of the existing 250 ktpm float plant are in place, while funding
arrangements for the new plant construction are under way, together with off-
take and marketing agreements. It is also anticipated that there could be
significant production of gold and sulphur
as by-products.
At our TGME operations in Pilgrim"s Rest we are awaiting the granting of mining
and prospecting licences, which will allow us to increase production
significantly in the short term. An aggressive and detailed exploration
programme has been prepared, which will make use of the latest exploration
technology, something which has been lacking in that goldfield in the past. We
believe that the application of cutting edge exploration techniques will provide
a real opportunity to increase the known mineral resource in the area.
The mining right application for Ezulwini (formerly REL"s No 4 shaft) was
accepted by the DME in May 2005, and thanks to their dedicated input, we believe
that the mining right will be issued in early 2006. The EIA, Social and Labour
Plan and EMP were submitted in good time and are currently undergoing scrutiny
by the DME. In the interim, Simmers has taken full responsibility for all
operations, including pumping from Harmony, as a failure to do so would have
resulted in the irrevocable flooding of the shaft. By taking over the shaft we
are also able to prevent further deterioration of the infrastructure, and
examine the possibilities for limiting costly water ingress, with the aim of
reducing pumping costs significantly. As its starter project, Simmers is
targeting previously unmined areas at the high grade shaft pillar as well as the
independent high grade Middle Elsburg uranium mine which ceased production in
the nineties.
With the above projects firmly under control, our aim is to ensure that they
achieve their maximum potential going forward. In the next six months our focus
will be on building up production at Buffelsfontein; ramping up of production
and opening new extensions at TGME together with commencement of exploration
activities; and the completion of feasibility studies on gold and uranium at
Ezulwini and uranium at Buffelsfontein. These will all require focus and
dedication, but we believe that with the small but highly motivated team at
Simmers, we have the skills to meet these challenges.
By order of the Chief Executive Officer
Consolidated Mining Management Services Ltd
Secretaries
15 December 2005
Johannesburg
Transfer secretaries
South Africa
Computershare Investor Services 2004 (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
Investor relations
Gail Strauss
Tel +27 84 777 4060 Fax +27 11 884 2074
E-mail gailstrauss@mweb.co.za
Registered office
5 Press Avenue Selby Johannesburg 2135 Republic of South Africa
United Kingdom office
St. James"s Corporate Services Limited 6 St. James"s Place, London, SWIA INP
United Kingdom
Sponsor
Sasfin Capital
A division of Sasfin Bank Limited
Sasfin Place North Block 13 - 15 Scott Street Waverley 2090
Directors RAR Kebble (Non-Executive Chairman) BJ Njenje (Non-Executive Vice-
Chairperson) GT Miller (Chief Executive Officer) JdeV Berry (Executive
Director) GP Wanblad (Executive Director)
JP Schumacher (Non-Executive Director) AV Mkele (Non-Executive Director) DH
Brown (Independent Non-Executive Director)
NRG Brunette (Independent Non-Executive Director) K Wakeford (Independent Non-
Executive Director) AX Sisulu (Independent
Non-Executive Director) E Oosthuizen (Alternate Director to
JP Schumacher) V Watson (Alternate Director to AV Mkele)
Date: 15/12/2005 08:00:48 AM Produced by the JSE SENS Department
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