[miningmx.com] — SIMMER & Jack has outraged investors one last time before disappearing into obscurity as a cash shell, with the market showing doubts over whether new proprietor Village Main Reef would be able to turn Simmers’ struggling gold assets around.
A large number of Village shareholder made for the door on Monday as Simmers reported dire financial figures, posting a quarterly fall in revenue and output of 12% and 15% (to 1,305kg) respectively.
Monday was the first trading day for former Simmers shareholders to trade their newly issued Village shares – about 47 Village shares for every 100 Simmers shares held – following the transfer of Simmers’ assets to Village last week Wednesday.
Village’s shares subsequently closed 21.25% lower at R1.26, after trading at R1.10 (down 31%) at some stage.
Among Village CEO Bernard Swanepoel’s first priorities would be to turn the fortunes of Tau Lekoa and especially Buffelsfontein Gold Mine (BGM) around.
Production at Tau Lekoa was down 14% (to 25,033oz), with overall yield decreasing by 5% and unit costs up 11% (to R252,972/kg). Similarly, output at BGM decreased by 16% (to 16,613 oz), with unit costs also increasing by 11%.
Management blamed lower output on the Christmas break, safety stoppages and labour disruptions during a period of wage negotiations.
In addition to markedly lower revenue and output figures, Simmers’ results were tainted by several downward adjustments to the value of investments, most notably an equity accounted loss on its stake in First Uranium – diluted from 34.1% to 25.6%.
These factors all contributed to Simmers’ posting a pre-tax loss of R227.3m, compared to a R204.6m profit the previous quarter.
“Both BGM and Tau Lekoa has continued to produce less than planned for gold during April and May,’ read a management statement, saying output would fall further during the current quarter.
“BGM has prepared a revised business plan that is aimed at significantly reducing the cost base at BGM, while maintaining production at the levels achieved over the past 5 months.’
As a results, BGM would retrench 1,200 employees of its 3,700 workforce at the mine, with the process to be concluded on August 15.
A Johannesburg-based gold analyst said the decline in Village’s share price should be attributed to the Simmers’ results, although the extent of the fall was probably overdone.
“Bernard Swanepoel knows better than anyone else how to operate a marginal mine and should be given time,’ the analyst said.
“The retrenchments are already a very bold step. Given the sensitivity you can be sure he wouldn’t have done it unless he really had to.’
