Johannesburg, South Africa — MININGREVIEW.COM — 21 July 2010 – Simmer & Jack Mines Limited has announced that the Department of Mineral Resources has transferred the mining rights for the Tau Lekoa mine from AngloGold Ashanti to its wholly-owned subsidiary Buffelsfontein Gold Mines Limited.
A statement issued here today confirmed that “’ with the registration of the transfer of the mining rights being the final condition precedent in terms of the sale and purchase agreement between Simmers and AngloGold Ashanti “’ full ownership of Tau Lekoa and the adjacent properties of Weltevreden and Goedgenoeg would pass to Simmers from 1 August 2010.
Simmers entered into an agreement with AngloGold Ashanti in February 2009 to acquire Tau Lekoa and the adjacent properties of Weltevreden and Goedgenoeg for a total purchase consideration of R600 million, payable at completion of the transaction.
In terms of the agreement Simmers will settle the purchase price of R600 million as follows: R450 million in cash, presently held in guarantee with a financial institution on behalf of AngloGold Ashanti; and the remaining R150 million in cash or in Simmers shares.
Commenting on the outcome, Simmers’ interim CEO Nico Schoeman said: “The conclusion of this deal is a turning point for the company. It’s the first strategic step in transforming Simmers into a company capable of sustaining healthy profitability, given that Tau Lekoa is capable of generating positive free cash flow from the outset. Equally important is the substantive impact that this acquisition will have on the risk profile of Buffelsfontein Gold Mine,” he added.
“By leveraging off the benefits of shared metallurgical processing and services costs, we are targeting a cost saving of R100 million over the next 12 months, which will contribute significantly towards returning Buffelsfontein to profitability,” Schoeman continued.
Schoeman said that the handover process, which had commenced in September last year, had gone smoothly, with Simmers shadow-managing the AngloGold Ashanti Tau Lekoa team.
Tau Lekoa is expected to produce an annualised 125 000 oz of gold at a total cash cost of around US$815/oz which is expected to generate an average, annualised free cash flow of R150 million in the first year.
“The acquisition will transform Simmers from a marginal, junior miner into a mid-tier gold producer. It provides cash flow, scale and substance to our current gold business, as well as the potential for upside via the development of Weltevreden and Goedgenoeg “’ two expansion projects which could extend the life of Tau Lekoa by some 14 years,” said Schoeman.