[miningmx.com] — FORMER Harmony CEO Bernard Swanepoel is right back into the gold mining business following the deal through which his Village Main Reef (Village) company will take over Simmer and Jack Mines (Simmers).
The deal has been struck on terms which seem highly favourable to Village, despite the fact that a nominal 14.7% premium is being paid on the 30 day Simmers VWAP (volume weighted average price).
The total purchase price is some R1.3bn to be settled through the issue of 598 million Village shares at a price of 220c per share and the assumption of certain liabilities.
That equates to an exchange ratio valuing Simmers at 105c a share. Simmers opened trading on the JSE on Monday at 97c a share.
Village is acquiring a key asset in the form of the Tau Lekoa mine through the issue of its own paper after Simmers paid around R600m in cash for the mine.
The deal has to be viewed as disappointing for Simmers shareholders, given the share’s all-time high of 790c reached in March 2008 and management’s failure to establish it as a viable operator of marginal gold mines.
Management’s latest hope was that the acquisition of the high-cost – but still profitable – Tau Lekoa mine from AngloGold Ashanti would let Simmers trade its way out of financial trouble giving it breathing space in which to fix its loss making Buffelsfontein operation.
It would now appear that Simmers management has been forced into this deal through continuing adverse financial circumstances, although that’s denied by CFO Marius Saaiman.
But Saaiman confirmed that Simmers would shortly have had to raise up to another R200m to meet debt repayments and working capital requirements. There was apparently little appetite for that from the group’s major shareholders.
“This merger will result in far less dilution for Simmers shareholders than if we had to raise capital because that could only have taken place at a very deep discount to the existing share price. That would also have resulted in a serious dilution of our BEE partners,” he commented.
Saaiman added the merger with Village also meant that Simmers could get rid of the baggage of the bitter corporate feud that had taken place between the former management and the company’s BEE partner – Vulisango.
He commented: “This way we can take the company forward with investors focussed on the assets and not the messy history of the past 24 months.
“The merged entity will have improved access to capital markets for funding of its future growth, while Simmers’ shareholders will gain exposure to Village’s platinum, gold and antimony assets.’
Swanepoel – who is currently the chairperson of Simmers – will be the CEO of the merged company. The future of Simmers interim CEO Nico Schoeman was not clear at this stage.
Schoeman was not quoted in today’s Simmers’ release and was not available for comment. According to Saaiman he is currently on leave.
Swanepoel told Miningmx, “obviously Village is happy with the potential value we see in this suite of assets and we believe in our ability to make them work.
“This deal could be a real company maker for Village and it moves Village well up the rankings in terms of size putting us into the mid-tier gold mining category.
“I believe Buffels offers classic leverage to the gold price if it delivers on its mining plans while the challenge at Tau Lekoa is to ensure it delivers at a high level to justify the price that Simmers paid for it.”
Asked about plans for Simmers 33% stake in First Uranium Swanepoel replied: “We are happy to hold that investment because we don’t mind exposure to the uranium business.”
Acquiring Simmers is Swanepoel’s third transaction since getting back into the mining sector through the acquisition of Lesego Platinum and Consolidated Murchison.
He’s gone from nowhere to mid-tier mining status in less than three years but the hard part now lies ahead in the reality of making these kind of marginal assets turn a profit where so many others have either failed or given up.
