JOHANNESBURG (miningweekly.com) – JSE-listed gold-mining company Simmer & Jack Mines (Simmers) intended placing its already downsized Transvaal Gold Mining Estate (TGME) in Mpumalanga province on care-and-maintenance in order to focus more intensely on its better-performing gold mines in North West province, new Simmers CEO Deon van der Mescht said on Friday.

Van der Mescht told Mining Weekly Online that TGME volumes had been too low to make the operation profitable and Simmers was thus embarking on a consultative process under Section 189A of the Labour Relations to downsize it further.

"We'll put that operation on care-and-maintenance and then review our strategy for that operation going forward," he added.

The slow acquisition of Tau Lekoa in North West, which should have come under Simmers' management from AngloGold Ashanti on January 1, was the result of the permitting process being held up because of Simmers' dispute with its black-economic empowerment (BEE) shareholder, Vulisango.

The dispute had since been resolved, with Vulisango represented on what Van der Mescht described as having "a very strong independent presence".

The company, supported by its BEE partner, had last week held a "very positive" meeting with the Department of Mineral Resources.

"Whatever impediments there were in terms of concluding the permitting process, have now been removed," he added.

The work down at TGME in the last few years was all aimed at extracting gold from surface sources and the loss-making operation, which was hit further by the November and December rains, would have required more capital to unlock its potential.

In the December quarter, Simmers gold production was down 13% to 29 000 oz owing mainly to the shaft rationalisation process at the Buffelsfontein (Buffels) gold mine in North West province and the company's shift in focus to profitable ounces rather than ounces at any cost.

Putting TGME on care-and-maintenance would allow management to give more attention to its regional Buffels/Tau Lekoa consolidation where there are R100-million-a-year potential synergies and superior returns as higher-grade areas are mined.

At Buffels - where the low December quarter production of 838 kg was in line with the guidance given to facilitate the now-completed rationalisation process - the focus at operational level has been from tonnage to grade in the company's bid to mine profitable ounces. The No 5 Shaft rehabilitation programme was completed within budget.

The completion of the acquisition of Tau Lekoa, where production exceeds Simmers' forecast, has been extended by six months to September.

"The Simmers team is in place and is shadow managing operations in anticipation of taking ownership later this year," Van der Mescht told Mining Weekly Online.

The investigations of the economic potential of the Weltevreden gold deposit are likely to result in the culmination of a prefeasibility study by the first quarter of the next financial year.

Gold revenue of R238-million in the December quarter was down on the R246-million in the September quarter, but Buffels managed a cash operating profit of R8-million, compared with the previous quarter's R29-million loss.

Loss before tax narrowed by 25%, from R147-million in the September quarter to R110-million in the December quarter under review.

Unit cash costs declined 4%, from R266 000/kg to R254 000/kg and total cash costs fell 17%, which equated to R45,6-million.

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