Simmers cuts it fine on loan repayment

[] — SIMMER and Jack Mines (Simmers) has so far raised R128m through selling JSE-listed bonds but it needs to find another R70m to meet the loan repayment due to Rand Merchant Bank (RMB) on July 31.

Of the money raised so far about R100m has been used to provide the cash environmental rehabilitation guarantees insisted on by the Department of Mineral Resources (DMR).

The balance has been paid over as an initial instalment on the R100m repayment due to RMB by the end of July.

Simmers owes a total R220m to RMB with the balance of R120m due in four equal instalments of R30m to be made monthly from September this year.

According to CEO Nico Schoeman investors have indicated they are prepared to take up the additional R70m in bonds but only once Simmers has finally completed the acquisition of the Tau Lekoa mine from AngloGold Ashanti.

Conclusion of the deal has been “imminent’ since June 29 when Schoeman said one document remained outstanding from the Free State provincial government before registration could take place.

The Simmers share price has dropped steadily since then hitting a series of new 12-month lows as it fell from 96c on July 1 to as low as 83c on Thursday apparently on bearish speculation the Tau Lekoa deal would not go through.

Schoeman told Miningmx on Thursday, “we have received the outstanding document from the Free State government and lodged all the documents with the DMR in Pretoria which is now busy with registration of the mining right over Tau Lekoa.

“We have sufficient confidence in the terms of the feedback received from the DMR plus the positive evidence that we have seen that registration most definitely will happen.’

Schoeman declined to comment on when he expected to finally receive registration.

The acquisition of Tau Lekoa is of critical importance to Simmers because of dropping production at its flagship Buffelsfontein mine which is barely profitable at current gold prices.

Tau Lekoa is expected to contribute R150m in free cash flow during financial 2011, assuming a gold price of R265,000/kg compared with the current gold price of around R300,000/kg.

Asked about the weakness in the Simmers share price Schoeman replied, “it’s understandable given our track record so far of overpromising and under-delivering.

“I think you will see the share price start to recover as soon as the benefits of the cash flow from Tau Lekoa become apparent.’

The writer owns shares in Simmer and Jack.