Simmers mulls financing options for potential growth projects, stock takes knock
miningweekly.com
By: Matthew Hill
Published on 19th June 2008
Gold-miner Simmer & Jack Mines (Simmers) share price fell on a report that it was looking at financing options for potential capital projects, but CEO Gordon Miller stressed that the company "did not have to raise funds at all".
Simmers share price, which had shown a dismal performance over the past 12 months, was, however, due for some upward movement, an analyst said.
RBC Capital Markets mining analyst Leon Esterhuizen said he believed that a positive share-price shift was not far off.
"Within the next six to nine months, I'm expecting some significant up tick in the share price, on the back of delivery," he said in an interview. "And, by all accounts it looks like they are getting there."
Esterhuizen said that Simmers' stock had been suffering to a large extent from the volatility in the so-called uranium spot price, which had weakened over the past few months.
This dragged down the company's majority owned First Uranium's share price, which, in turn, affected Simmers market value.
"First Uranium, for a start, is significantly undervalued," Esterhuizen stated.
"If you assume that not to be the case, then you pay the full value of First Uranium through the Simmers share price now, and you're still getting all the gold assets for free."
"The gold assets might not be worth a heck of a lot, but they are certainly not worth zero," he asserted.
Esterhuizen believed that there was a "fundamental investment case" in the gold miner, and that the market would respond to delivery.
Simmers slid by over 4% on Thursday, but later pulled back to close 1,65% down at R4,18 a share.
FINANCING
Another factor that could have hit Simmers' stock was a reported rumour doing the rounds that it was looking to raise around $80-million, he said.
"From that day, the share price has been under pressure," Esterhuizen noted.
Miller said in the results presentation for the year ended March 31 that the company was considering two expansion projects, including the Strathmore project at Buffelsfontein, for which it had completed a prefeasibility study, and the mega-float project at the same mine, near Klerksdorp.
The mega-float project aimed to add 35 000 oz/y of low-cost gold production to Buffelfontein's production profile over the seven-year life of the project.
For these two projects, Simmers would need money, but Miller said that it was too early to provide details on this.
"There's either debt or equity, unless of course there's money that falls from heaven, but we haven't come across that stuff yet," he stated in answer to a question. "Obviously, we are considering all our options."
Simmers was also considering building an acid plant to feed its plants, but could fund this either on or off its balance sheet, depending on the size of the project.
"The whole objective is to secure long-term, low-cost sulphuric acid," Miller said.
‘CAN'T SIT FOREVER'
However, the Strathmore and the mega-float projects did appear to be attractive, and it was only a question of when the company wanted to push the button on them.
"There's no doubt that starting up a surface processing operation at Buffelsfontein that has got a seven-year life is hugely attractive, and we can't sit on our hands forever," Miller commented.
"We've got the mills, we've got the dumps, it's very easy to assess, so we'd like to proceed."
"It's the same with Strathmore, it's been around for a long time, we're beginning to understand that we've got a very significant asset that doesn't need significant amounts of money to convert it into one of the world's most sought-after gold properties going forward," he added.
But he declined to comment on the timing of any trigger pulling.
"We'll consider our options and we're likely to move in the very near future, in terms of moving forward on those projects," Miller said.
However, he stressed that Simmers "did not have to raise funds at all".
"The question is, when do we want to start the projects. It could be very soon, it could take a while."
LISTING
Meanwhile, asked to comment on the chances of Simmers seeking a secondary listing in Toronto, Miller was tight lipped.
"If we were considering one, we wouldn't be able to tell you, in terms of their [the TSX's] listing requirements," he stated.
"However, it is certainly an alternative that will always be considered."
Miller explained that, while European markets had a better understanding of African risk, North American markets tended to rate gold miners higher.
"The North American gold companies tend to trade at a significantly higher premium than others, irrespective of country risk," he stated.
"To some extent, you also eliminate potential arbitrages, if you have stocks held on the same exchange and trading in the same time zone.
"There are various alternatives, and we consider them all the time." |
