High costs widen loss at Simmers to R233m
June 20, 2008
By Justin Brown
Johannesburg - Simmer & Jack posted a record R233 million loss in the year to March as the company's revenue continued to be outweighed by higher production costs and share options, overheads and finance costs.
The gold and uranium mining company incurred a loss of R422 million over the two years to March. Share options, overheads and finance costs were 41 percent of Simmers' revenue of R1.458 billion.
Stephen Meintjes of Imara SP Reid said that despite the losses, it was commendable that Simmers continued to make progress with its gold and uranium projects, some of which had come within budget.
Meintjes said local investors were typically harsh in their rating of gold producers such as Simmers, compared to Canadian companies.
Simmers' gold mines in Mpumalanga and the North West should get a better rating, especially when the company started to produce "visible profits", he added.
Gerhard Jacobs, Simmers' chief financial officer, said share option costs in the year to next March would be unchanged at R79 million.
Leon Estherhuizen, a Royal Bank of Canada analyst, said the problem with Simmers was that it had "difficult assets". However, Estherhuizen said the company's uranium assets were not "vulnerable".
Simmers' shares have been shunned since it said it would embark on a rights issue to fund projects that include Megafloat and Strathmore.
Deon van der Mescht, Simmers' chief operating officer, said the company could raise up to R350 million from the two projects and the group was looking at financing options.
Simmers' share price has fallen 28 percent over the past three months, making it harder for the company to raise money through a rights issue.
"Simmers is going to become a different company in the next six months. [Its] share price could double in the next 24 months," said Estherhuizen.
Simmers spent R1.1 billion developing its gold and uranium projects.
It has a 62 percent stake in First Uranium, which generated a loss of R22.3 million.
The firm had R1.5 billion in cash available at the year-end, up from R1.2 billion compared with last year, due to an increase of R501 million from the exchange rate changes on cash held in foreign currencies.
Jacobs said the gold and uranium mining firm could turn its first annual operating profit in the current financial year. However, he would not be drawn on when Simmers would generate profit after tax.
Simmers' gold output rose 10 percent to almost 140 000 ounces compared to the previous financial year.
Gordon Miller, Simmers' chief executive, said the firm was forecasting its gold output to reach a peak of 668 000 ounces by 2012 and uranium production was set to reach 1.8 million pounds in 2011.
Meintjes thought Simmers would deliver on both its gold and uranium forecasts.
Miller said the firm could pay a C$135 million (R1 billion) convertible debenture, due in June 2012, from cash flows from the production.
He expected the company's share price to appreciate to such a level that shareholders would want to convert their shares.
Simmers shares lost 1.65 percent to R4.18. The gold mining sector slipped 0.48 percent.
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