Simmer & Jack Mines, Limited
JSE : SIM

Simmer & Jack Mines, Limited

February 17, 2009 16:31 ET

Acquisition of Tau Lekoa From AngloGold Ashanti Limited ("AngloGold Ashanti")

TORONTO, ONTARIO and JOHANNESBURG, SOUTH AFRICA--(Marketwire - Feb. 17, 2009) -

THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES.

Simmers (JSE:SIM) 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.

Conditions precedent

The Acquisition is subject to the fulfillment of the following salient conditions precedent:

1. Simmers raising sufficient cash to settle the Completion Consideration subject to the Share Value;

2. 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;

3. the approval of the Acquisition by Simmers shareholders, if so required; and

4. 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," said Miller.

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
(million) Grade Au Ounces
(g/t) Tonnes (million)
Tau Lekoa (VCR
Base) Proven 0.95 3.70 3.50 0.113
Probable 2.42 4.24 10.29 0.331
-------------------------------------------------------------------
Total 3.37 4.09 13.79 0.443
-------------------------------------------------------------------
VCR
Jonkerskraal Proven 0.38 4.01 1.52 0.049
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 (VCR
Base) Measured 2.70 6.69 18.06 0.581
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.



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

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")


Contact Information

  • Simmer & Jack Mines, Limited
    Gail Strauss
    Communications Officer
    +27 11 830 0390 or +27 (0)84 777 4060 (mobile)
    Email: gail@simmers.co.za