JOHANNESBURG (Business Day) -- Marginal gold miner Simmer & Jack [JSE:SIM] plans to place shares with institutions to raise R300 million (US$42.6 million) to expand and accelerate gold production at its operations in North West and Mpumalanga, it said on Friday.
Simmers shares had firmed 4 cents to 690 cents by Friday afternoon. The share price has risen from a low of 125 cents last March, after the resolution of a dispute with its empowerment shareholders.
The stronger price reflects rapid progress on developing its gold and uranium assets, including the separate listing of a 67% held subsidiary, First Uranium [TSX:FIU], focusing on Simmers' uranium assets in South Africa.
Gold was trading at $660/oz at the end of last week while uranium was trading at $140/pound.
Simmers said the funds would be used for two projects. The first would be reopening the high grade number five shaft at its Buffelsfontein operations in North West. They were bought from DRDGold [JSE:DRD] two years ago after a seismic event. The number five shaft was rendered inaccessible by the quake and since last September Simmers has been rehabilitating it.
The rehabilitation will absorb about R170 million (US$24.1 million) of the R300 million (US42.6 million) being raised but will add 700,000 ounces of gold to Simmers' reported reserves. Production from the shaft will begin in the current financial year and by next March it should have delivered 12,000 ounces of gold at a cash cost of $378/oz.
Simmers CE Gordon Miller said the total capital cost of bringing number five into production would be about R800 million (US$113 million) but most of this would be self-funded.
The remainder of the money would be raised from institutions. It would be used to conduct a feasibility study and construct new heap leach pads at the group's properties in Mpumalanga to refocus on surface operations. They have lower risk and higher returns than underground mining, he said. If the study is successful, surface gold mining in the area could increase to 250,000 ounces a year at a total capital and operating cost of $240/oz.
The surface operations will take place across three properties: Elandsdrift, DGS and the Molototse Valley. About 350 hectare would be mined land and 250 hectare would hold heap leach pads.
Miller said although new underground projects were being deferred in favour of surface mining, the existing underground mine at Frankfort would continue to operate. Recoveries there had been disappointing but funds would be spent on improving extraction rates.
Fund managers, including Bank Frick & Co, Regarding Capital Management, Investec Asset Management, Oryx, Deutsche, Sanlam, Nedcor and Peregrine, held 35.5% of Simmers' shares at the end of March. About 78% of the company's shareholders are local residents and 22% are resident offshore.
