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Send  Print  Share  RSS  Twitter  22 Nov 2010

JSE Results: Simmers


Johannesburg, Nov 22 (I-Net Bridge) - Simmer and Jack Mines (SIM) on Monday reported a 108% rise in gold production to 36,608oz in the six months ended September 2010

Revenue increased by 106% to 327 million rand compared to the 158 million rand reported for the quarter ended June. It reported a cash operating profit of 7.9 million rand compared with a loss of 52.8 million rand during the previous quarter.

The group said at Buffelsfontein Gold Mine (BGM), the safety performance substantially improved, with no fatalities during the quarter under review and 488,030 fatality-free-shifts.

Quarter-on-quarter gold production increased by 4% to 18,353 oz and gold revenue increased from 158 million rand to 163 million rand.

Total cash costs decreased quarter-on-quarter by 10% to 190 million rand, or $1,411/oz. It reported a cash operating loss of 27.5 million rand compared to a loss of 52.7 million rand in the previous quarter.

At Tau Lekoa Mine, mining rights were transferred into a Simmer and Jack subsidiary and an initial 450 million rand was paid to AngloGold Ashanti as settlement for the Tau Lekoa acquisition. The remainder of purchase price (R32 million) was settled on 1 November.

Simmer and Jack recently announced that a Gold Loan to the value of $20

million was concluded with Deutsche Bank AG. The Gold Loan will be amortised

through physical gold delivery to Deutsche Bank by Simmer and Jack over a twelve month period. The loan proceed was used to settle the R105 million that was due to Rand Merchant Bank, under the restructured bridge loan that was entered into in July 2010.

"This is a significant step forward in restructuring the Simmer and

Jack balance sheet, as debt is now more closely aligned with the cash flow

expected from the operations, said interim CEO Nico Schoeman.

The focus on quality mining at BGM resulted in notable improvement in

the underground recovered grade achieved towards the end of Q2, with grade

of 3.88 g/t recovered during September 2010, compared to 2.97 g/t during July 2010. This ensures that BGM remains on track to achieve its targeted 4 g/t.

The cash operating profit of R7.9 million, compared to a loss of R52.8 million during the previous quarter, is indicative of the company's turnaround plan and provides affirmation that the company remains confident that the annual production target of 150,000 oz of gold by the end of March 2011, and 150 million rand of free cash to be generated from Tau Lekoa by July 2011, will be achieved.

The quarter-on-quarter increase in absolute total costs is as a direct result of Tau Lekoa, for the first time, being consolidated with BGM into Simmer and Jack.

Tau Lekoa's total cash cost decline of 2% is encouraging, while BGM is starting to show signs of contributing positively to free cash flow generation as the focus on profitable production and the control of operating costs are finding its way into the numbers, said Schoeman.

Efforts to extract real synergy benefits between Tau Lekoa and BGM are ongoing and head office and administrative costs at Simmer and Jack have been materially reduced.

It was announced during the last quarter that the Company will dispose of Transvaal Gold Mining Estates Limited (TGME) to Stonewall Mining for 25

Million rand. 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, said Schoeman.

"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 maximised," Schoeman concluded.

I-Net Bridge, Tel: +27-11-280-0644,

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