JOHANNESBURG (miningweekly.com) – Gold and uranium producer Simmer & Jack (Simmers) has reported a profit for the 2009 financial year on the back of higher output and a strong gold price.

The South African miner said on Thursday that gross profit had jumped to R91,8-million, from a loss of R60-million in the 2008 financial year. Revenue surged by 56% from R855-million to R1,3-billion in 2009.

Simmers boosted its gold production by 9% to 183 036 oz in 2009.

“Despite what has come down to be one of the most challenging periods in the industry, we have made significant headway with a number of our projects,” said CEO Gordon Miller.

After-tax profit surged to R2,6-billion in the year under review, from a loss of R277-million, as Simmers sold a portion of its shares in First Uranium to fund the acquisition of the Tau Lekoa mine. Simmers’ shareholding in First Uranium, which meant that the uranium miner was now an associate company, and not a subsidiary anymore.

Simmers purchased Tau Lekoa from AngloGold Ashanti for R600-million, of which R450-million was payable in cash, and R150-million could be off-set by free cash flow generated by Tau Lekoa in the 2009 calendar year.

The effective date of the transaction is January 1, 2010, and the acquisition would be made through Simmers’ Buffelsfontein gold mine (BGM).

Speaking at the company’s results presentation in Johannesburg, MD of gold operations, Deon van der Mescht said that the Tau Lekoa operations would result in Simmers becoming a mid-tier producer, and would add an estimated 130 000 oz/y of gold to its production profile.

Simmers would also benefit from regional synergies, as the Tau Lekoa mine would fit in with the operations currently being undertaken at BGM. The mine would also provide a robust cash flow over the next three years, which was considered a critical period for BGM, Van der Mescht said. He added that Tau Lekoa would mitigate any shortfalls in expected production from BGM, reducing the risk profile of the operation.

During the period under review, BGM’s production output fell by 3% year-on-year, reflecting the challenges faced by the mining operation. However, the completion of the rehabilitation of the high-grade number five shaft was expected to redress this issue going forward and ensure increased gold production in the following year.

“Safety issues also affected BGM’s potential to deliver the 122 000 oz as per the financial year plan, and a fatal accident in August 2008 resulted in the closure of the high grade number two shaft, for two weeks,” said Van der Mescht. The number two shaft only resumed operation at full capacity in January this year.

He added that despite a “very difficult” operating environment, BGM made good progress in a number of areas, which would stand it in good stead to achieve planned production levels going forward.

“At the same time, phase one and two of the rehabilitation of the number five shaft was completed, and the seven shaft refrigeration plant was also commissioned during the fourth quarter. Both these projects are key to getting BGM to the point where it can begin wrapping up its full production potential,” he added.

The company would now undertake the third phase of the rehabilitation project of the number five shaft, which was damaged in an earthquake in March 2005. This phase would include refrigeration units to combat high underground temperatures, as well as an ore handling system to replace the current cage hoisting system.

“The successful integration of Tau Lekoa into BGM is a key priority in order to benefit from the regional synergies, which will be created when this important asset comes online in January 2010,” Van der Mescht added.

Meanwhile, Simmers reported that year-on-year production at Transvaal Gold Mining Estates increased by 18% to 10 970 oz of gold. However, this was still 2 030 oz short of the 13 000-oz target in the 2009 financial year production profile. The shortfall was primarily owing to the six-month hiatus between the awarding of the Mining Right at Elandsdrift in March 2008 and the issuing of the water use license in October.

The Ezulwini mine completed a number of milestones during the period under review, including the completion of the rehabilitation and re-engineering of the main shaft, and the commissioning of both its gold and uranium plants.

Looking ahead, Miller stated that the focus in the current financial year would be on increasing gold production at all of the company’s operations in order to become a mid-tier producer of both gold and uranium.

At the same time, cash preservation and flexibility was critical if the company were to mitigate the risks inherent in the volatile gold price, and uncertainty in the global capital markets, he said.

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