SIM
SIIF
SIM - Acquisition Of Tau Lekoa From Anglogold Ashanti Limited ("Anglogold
Ashanti") And Cautionary Announcement
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")
ACQUISITION OF TAU LEKOA FROM ANGLOGOLD ASHANTI LIMITED ("ANGLOGOLD ASHANTI")
CAUTIONARY ANNOUNCEMENT
Simmers is pleased to announce that it has entered into an agreement with
AngloGold Ashanti to acquire, as a going concern, (the "Acquisition") the
assets, intellectual property and associated rights to the Tau Lekoa Mine
including the Weltevreden and Goedgenoeg properties ("Tau Lekoa" or the "Sale
Assets") for a consideration of R600 million (the "Agreement").
Rationale for the Acquisition
The directors of Simmers believe that the Acquisition is transformational for
its gold business in providing scale, diversifying production risk and providing
operational synergies with the existing Buffelsfontein Gold Mines Limited
("BGM") operations.
Highlights of the Acquisition include:
The existing production and positive cash flow from Tau Lekoa will substantially
enhance BGM`s production profile:
BGM is expected to produce approximately 144 000 ounces in financial year 2010,
which runs from 01 April 2009 to 31 March 2010.
Tau Lekoa is expected to produce 150 000 oz in calendar 2009 at a cash cost of
approximately US$455-US$475/oz or R143 000/kg - R149 000/kg.(1)
Potential to improve the performance of the Sale Assets by applying an effective
cost structure and improving operational performance.
Well-maintained shaft and associated infrastructure.
Provides operational flexibility and diversifies risk through the addition of a
shaft providing ore to the plant at BGM.
Significant overhead synergies and savings generated from operating Tau Lekoa
and BGM as one mine complex.
Additional reserves of 0.9 Moz and resources of 5.3 Moz plus additional upside
potential at Weltevreden.
(1) Source: AngloGold Ashanti Report for the Quarter and Year Ended 31 December
2008. US$:ZAR Forecast for CY 2009 of 9.75
Salient terms of the agreement
Effective date
The Effective Date of the Agreement is the later of 1 January 2010 or the date
of fulfillment of all of the conditions precedent set out below ("Effective
Date"). AngloGold Ashanti shall continue to operate Tau Lekoa to the Effective
Date, after which ownership shall pass to Simmers.
Consideration
The consideration for the Acquisition is R600 million less an offset up to a
maximum of R150 million for unhedged free cash flow generated by the Tau Lekoa
Mine in the period between 1 January 2009 and 31 December 2009 as well as an
offset for unhedged free cashflow generated by the Tau Lekoa Mine in the period
between 1 January 2010 and the Effective Date of the Acquisition (the
"Completion Consideration").
Simmers shall endeavor to settle the Completion Consideration entirely in cash,
however Simmers may issue to AngloGold Ashanti ordinary shares in Simmers up to
a maximum value of R150 million at the 10 day volume weighted average trading
price on the JSE immediately prior to the issue date of the Shares (the "Share
Value") with the remainder payable in cash.
Simmers has today announced it has sold 19 600 000 shares in a "Bought Deal"
transaction led by RBC Capital Markets to raise approximately C$90 160 000 (R734
199 928). Simmers has also granted the underwriters a 15% overallotment option
which, if exercised would result in additional funding of C$13 524 000, (R110
129 989) towards the Acquisition. Further details of this transaction are
detailed in a separate announcement published simultaneously with this
announcement entitled "Disposal of 19 600 000 shares in First Uranium
Corporation".
Conditions precedent
The Acquisition is subject to the fulfillment of the following salient
conditions precedent:
- Simmers raising sufficient cash to settle the Completion Consideration
subject to the Share Value;
- the receipt of all Ministerial Consents and/or other Government agency
approvals in South Africa, as required to transfer all rights, title and
interests to the mining properties forming part of the Sale Assets;
- the approval of the Acquisition by Simmers shareholders, if so required;
and certain regulatory and other third party approvals, if and to the extent
required, including the South African Reserve Bank, the JSE Limited and the
South African Competition Commission.
The conditions precedent may be extended by either party under certain terms or
by mutual agreement.
Warranties
AngloGold Ashanti has provided warranties normal for a transaction of this
nature.
Undertakings
AngloGold Ashanti has undertaken to operate Tau Lekoa in the normal course of
business and to afford access to Simmers to its operations, its detailed mine
plans, capex plans and management accounts and to consult with Simmers on
management matters up to the Effective Date. After the Effective Date, AngloGold
Ashanti shall continue to provide technical support for a period of three months
if requested by Simmers.
Other terms
The Acquisition will be made through BGM, a wholly owned subsidiary of Simmers.
Following the Effective Date, Simmers will treat all ores produced from the Sale
Assets at its own processing facilities.
Simmers has agreed to pay a 3% gross revenue royalty to AngloGold Ashanti on a
quarterly basis which is payable on all gold produced by the Sale Assets and
sold at an average price exceeding R180 000/kg per quarter from 1 January 2010.
The royalty will not apply to gold sold at an average price below R180 000/kg
per quarter and will cease to apply once it has been paid in respect of 1.5
million ounces of gold produced by the Sale Assets.
Tau Lekoa
The Tau Lekoa Mine (previously known as Vaal Reefs No. 10 Shaft) is located
close to the town of Orkney in the North West Province, 12 kilometres from
Buffelsfontein Gold Mine and entails the underground exploitation of the
Ventersdorp Contact Reef ("VCR"). The mine is involved in the underground
exploitation of gold ores by means of drill, blast and water jetting / scraping
narrow reef mining systems that innovatively utilize hydropower as a means of
drilling and primary ore movement. The underground mine is accessed by two
surface shafts which were sunk in 1985 (one for people and materials, the other
for ventilation and ore transport). The Goedgenoeg and Weltevreden mineral
properties are contiguous to the Tau Lekoa Mine.
The Goedgenoeg and Weltevreden properties, located to the west and east of Tau
Lekoa respectively, have exploration potential and offer the possibility of
further upside. Weltevreden was initially developed by Gencor Limited as a mine
with a surface decline during the early 1990s at a capital cost of R229 million,
but development was abandoned for economic reasons during 1992. There is
potential to restart this operation and exploit its large VCR Mineral Resource.
For the year ended 31 December 2008, Tau Lekoa produced 143 000 oz of gold at a
cash cost of US$533/oz and is expected to produce 150 000 oz for the year ending
CY 2009 at cash cost of US$455-US$475/oz (1).
Gordon Miller, Chief Executive of Simmers, said: "the Acquisition is a major
step forward in achieving the Company`s growth objective of becoming a million
ounce per annum producer by 2012.
"Tau Lekoa is a relatively low-cost, low-risk asset that provides the Company
with an ideal platform to benefit from regional synergies by creating the
opportunity to utilize existing plant capacity at Buffelsfontein Gold Mine. In
the process, we will be adding substantial value to Simmers` wholly-owned gold
business with the added advantage of additional up-side potential from the
development of Weltevreden."
Simmers was advised by RBC Capital Markets.
Resources and Reserves
Resources and reserves of Tau Lekoa as disclosed by AngloGold Ashanti are set
out below:
As at 31 December 2008
Project Category Tonnes Metric Contained Au Ounces
(million) Grade Au Tonnes (million)
(g/t)
Tau Lekoa Proven 0.95 3.70 3.50 0.113
(VCR Base)
Probable 2.42 4.24 10.29 0.331
Total 3.37 4.09 13.79 0.443
VCR Proven 0.38 4.01 1.52 0.049
Jonkerskraal
Probable 3.64 3.67 13.35 0.429
Total 4.02 3.70 14.87 0.478
Tau Lekoa Proven 1.33 3.77 5.02 0.16
Probable 6.06 3.90 23.64 0.76
Total 7.39 3.88 28.66 0.922
Tau Lekoa Measured 2.70 6.69 18.06 0.581
(VCR Base)
Indicated 4.19 5.50 23.07 0.742
Inferred 3.07 5.62 17.24 0.554
Total 9.96 5.86 58.37 1.877
VCR Measured 0.70 5.97 4.16 0.134
Jonkerskraal
Indicated 5.90 4.88 28.80 0.926
Inferred 0.01 2.79 0.04 0.001
Total 6.61 4.99 33.00 1.061
VCR Measured 0.02 4.71 0.08 0.003
Weltevreden
Indicated 17.35 4.17 72.35 2.326
Inferred 0.23 5.79 1.32 0.043
Total 17.60 4.19 73.76 2.371
Tao Lekoa Measured 3.42 6.52 22.30 0.720
Indicated 27.44 4.53 124.22 3.990
Inferred 3.31 5.62 18.60 0.600
Total 34.18 4.83 165.13 5.309
(1) The Goedgenoeg resource at Tau Lekoa was not reported in the Published
resource for December 2008 as it was downgraded to inventory. The resource has a
category of inferred only. It has 8 486 357 square metres to give 32 197 239
tonnes at a value of 541 cm.g/t and a grade of 3.87 g/t to give 124 493 531
grammes or 4 002 559 ounces of Gold.
The Mineral Resources for Tau Lekoa have been prepared in accordance with
Canadian NI 43 -101 by Frederick Fouche a member of GSSA, registration number
962596. The Ore Reserve has been prepared by Richard Brokken; Plato registration
number PMS0171. Both Messers Fouche and Brokken are competent persons as defined
by NI 43 - 101.
Cautionary announcement
A table showing the financial effects of the Acquisition is in the course of
preparation and will be announced as soon as available.
Until such announcement is made, Simmers shareholders are advised to exercise
caution when dealing in their Simmers shares.
Johannesburg
17 February 2009
Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)
Corporate legal advisers to Simmers:
Routledge Modise
In association with Eversheds
Corporate advisers to Simmers:
RBC Capital Markets
Corporate advisers to AngloGold Ashanti:
Rand Merchant Bank
Legal advisers to AngloGold Ashanti:
Tabacks
For further information please contact:
Gail Strauss
Communications Officer
+27 11 830 0390 (office)
+27 (0)84 777 4060 (mobile)
gail@simmers.co.za
Date: 18/02/2009 07:52:40 Produced by the JSE SENS Department.
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