JOHANNESBURG (miningweekly.com) - Gold and uranium producer Simmer & Jack Mines (Simmers) is slowing the development of growth projects owing to the global credit crisis, but CEO Gordon Miller is confident that the JSE-listed miner has the financial flexibility to ensure capital for its projects, most of which were at some stage of construction or rehabilitation.

Speaking at Simmers’ interim results presentation, he said that the company’s gold operations had been scaled back on the basis of external funding for the growth projects, in an effort to adapt to the crisis in the capital markets.

“The updated technical reports for the Transvaal Gold Mining Estates (TGME) and for Buffelsfontein Gold Mine reflect a slower and more selective build-up of the new projects, which will be largely funded by cash flow from operations.”

“A capital outline of some $100-million has been outlined to bring new projects online for the next five years. Simmers is still pursuing a number of funding activities which, if successful, will result in us accelerating the capital programme, and at the same time accelerating production profiles, which are contained in the technical reports,” said Miller.

The company also updated the group’s technical reports to take into account the higher cost of mining consumables, as well as the increases in the cost of power and fuel, Miller stated.

Simmers reported a 37% increase in costs in the interim period, rising to R549-million. The higher costs led to the company posting a loss of R149-million, compared with a loss of R97,46-million a year earlier.

Phase 1 of the rehabilitation of Buffelsfontein high-grade No 5 shaft was completed during the period under review, which culminated in ore being hoisted from the shaft. Phase 2 was currently under way, with Phase 3 earmarked for completion by the end of the current financial year.

A development project at the high-grade No 2 shaft was also initiated in the period, in an effort to access a large block of high-grade ground, estimated to contain some 362 000 oz of gold.

Plans to increase production during the interim period had been halted by a fatality at Buffelsfontein’s No 2 shaft, resulting in the shaft being closed for almost two weeks, and the introduction of additional support and safety measures.

The TGME operation’s underground and surface projects were in a development phase, pending feasibility studies set for completion in March 2009.

“It has been established that the BIOX technology will increase recoveries at the underground Frankfort mine, from current levels of 65% to between 75% and 80%. Should these targets prove amendable to BIOX, it will bring 700 000 life-of-mine resource ounces that were previously considered uneconomical, to book,” the company’s interim report stated.

Simmers was hoping to convert 400 000 of its almost 2,6-million resource ounces to reserves by March 2009, as well as completing the BIOX feasibility study during that time.

The surface prefeasibility study, to investigate the near surface low-grade gold deposits in the region, had been completed in March this year, and confirmed sufficient potential for surface reserve ounces. However, cutbacks in exploration expenditure resulted in the reserve target being revised, but the company still expected to define 600 000 surface reserve ounces by 2013.

To date, about 163 000 compliant surface ounces had been defined, of which 100 000 oz would be treated using four heap leach pads, which were expected to yield 80 000 oz of gold over the next four years.

The first of these heap-leach projects would take place at Elandsdrift, which initially would have started in June 2007. However, the mining right for this project was only awarded in March this year, and the plant was commissioned the following October. The first gold was expected in December of this year, and Elandsdrift was expected to deliver 5 777 oz of gold over 14 months.

The company’s interim report stated that the first half of the year was also marked by significant ramp-up of operations at TSX- and JSE-listed First Uranium’s Ezulwini and Mine Waste Solutions (MWS), which resulted in an increase in capital expenditure.

During the second quarter, First Uranium, in which Simmers had the controlling stake, invested $35,4-million and $24,2-million in Ezulwini and MWS, respectively.

Construction delays at the Ezulwini uranium plant have pushed back uranium production to the fourth quarter of the 2009 financial year. The delays were on the part of the engineering, procurement, and construction management contractor in completing certain drawings, which in turn resulted in delays in the delivery of construction material.

At MWS, the extension and upgrade of the gold plant was completed and the construction of the uranium plant was on track for commissioning in December this year, with the first yellow cake expected in April 2009.

Simmers reported that in addition to achieving its production targets set out for the period, its focus for the next six months was on optimising expenditure and rationalising costs.

The company has entered into a mandate with a South African financial institution to arrange debt financing of about $100-million.

It has also signed a letter of intent with Vancouver-based Gold Wheaton, which will purchase 25% of the estimated 2,1-million ounces of the life-of-mine gold from MWS for $125-million. Simmers stated that assuming the completion of the financing activities, First Uranium anticipated that its capital programmes would continue as planned, and that both its mines would be generating free cash flow by April 2010.

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