Simmer & Jack releases Q2 results

Management's Discussion and Analysis of Results of Operations for the quarter ended 30 September 2008 (Q2 F2009)

Set out below is a review of the activities, consolidated results of operations and financial condition of Simmer & Jack Mines, Limited (Simmers or the Group) for the quarter ended 30 September 2008, referred to as Q2 or Q2 F2009, together with certain trends and factors that are expected to impact on the Group's performance in the future. Q3 F2009 refers to the next fiscal quarter ending 31 December 2008.

Information contained in this Management Discussion and Analysis (MD&A) is based on information available as at 4 November 2008, unless otherwise indicated. References to F2008 and F2009 refer to the fiscal years ending 31 March 2008 and 31 March 2009, respectively.

The reporting currency for Simmers is the South African Rand and all amounts in the following discussion are in Rands (R) except where otherwise indicated. The reporting currency for First Uranium Corporation, Simmers' 62.3% held subsidiary, is the US dollar (US$) and its figures are reported as such. Simmers' financial statements for the quarter ended 30 September 2008 have been prepared in accordance to the International Financial Reporting Standards (IFRS), JSE Listings Requirements and the South African Companies Act, 1973.

This MD&A includes certain forward-looking statements. Please read the cautionary note at the end of this document.

Responsibility of Management and the Board of Directors

Management is responsible for the information disclosed in this MD&A and has in place the appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is materially complete and reliable. In addition, Simmers' Audit Committee, on behalf of the Board of Directors, provides an oversight role with respect to all public financial disclosures made by the Group and has reviewed and approved this MD&A.

Overview

Simmer & Jack is a gold and uranium company with operations in South Africa's Gauteng, North West and Mpumalanga provinces. The Group has two wholly-owned gold operations: Buffelsfontein Gold Mine (BGM) in Stilfontein in the North West Province and Transvaal Gold Mining Estates (TGME) in the Pilgrim's Rest/Sabie area of Mpumalanga. As of 30 September 2008, Simmers had a 62.3% stake in Toronto Stock Exchange and JSE-listed First Uranium Corporation (FIU) which has two projects: the Ezulwini gold and uranium mine near Westonaria in Gauteng, and Mine Waste Solutions (MWS), a tailings re-treatment operation that neighbours BGM.

Highlights

• Narrowed net loss after taxation by 10%, from R95 million in Q1 to R85 million in Q2

• Reported R14 million profit from mining activities, a 207% improvement on the operating loss of R13 million in Q1

• Produced 44 936 ounces of gold for the Group, which is in line with guidance provided in Q1 of between 43 000 and 47 000 oz. This is a 9% increase on the 38 410 ounces produced in Q1. Of the total production, 40 440 ounces is attributable to Simmers

• Total cash costs increased 6% from R266 million to R283 million

• Revenue increased 17% from R260 million in Q1 F2008 to R304 million

• Aberdeen claim dismissed with costs

• Hoisting commences at BGM's high grade No. 5 shaft

• Mining from Duke's Hill initiated at TGME

• Delays in commissioning the elution circuit at FIU's Ezulwini Mine results in a lock-up of approximately 1 400 ounces of gold on carbon

• Production of ammonium diuranate (yellowcake) at the Ezulwini Mine further delayed from October 2008 until end of Q4 F2009 as a result of late delivery of certain construction materials

• MWS produced 11 821 ounces of gold at a cash cost of US$363 per ounce by reprocessing 1.8 million tonnes of tailings at a yield of 0.2 grams of gold per tonne.

• TGME's first heap leach pad at Elandsdrift was commissioned in October 2008, following the granting of a Water Use Licence earlier that month.

• Two-year wage agreement between TGME and the bargaining unit of the National Union on Mine workers (NUM) successfully concluded.

• Technical reports for BGM, TGME and Ezulwini Mine and MWS updated

Financial Overview

During Q2 F2009, the Group recorded total production of 44 936 ounces (1 398 kg) which was sold at an average price of R216 349 per kilogram (USUS$862/oz). This translated into gold revenue of R304 million, a 17 % increase on the previous quarter.

In common with other South African gold miners, the impact of rising costs and increased down-time as a consequence of safety issues, impacted on Simmers' performance in the second quarter. At BGM, in addition to a 17% increase in total cash costs, two fatal accidents curtailed production from the high grade No. 2 shaft during Q2.

At TGME, which is operating as a trial mining and pilot plant project until Biox technology is installed, the relatively low production levels carry a disproportionately large burden of the cash operating costs.

* Total Cash Costs are costs directly related to the physical activities of producing gold and include mining, processing and other plant costs; third-party refining and smelting costs; marketing expense, on-site general and administrative costs; royalties; on-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals are deducted from the above in computing cash costs. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation.

Total cash costs for the Group increased from R266 million in Q1 F2009 to R283 million (which included an NRV adjustment at FIU's Ezulwini Mine). The increase is mainly as a result of inflationary pressure on mining consumables, reagents and fuel, as well as a 13.3% increase in Eskom rates in July. The impact of higher energy costs can be seen in the effect of winter rates on BGM's costs: in Q1 winter rates added R2.66 million to BGM's power costs, compared to R5.77 million in Q2.TGME paid 19% more for power in Q2 (R2,2 million), compared to the previous quarter (R1.9 million). Winter rates apply for three months from June to August, inclusive.

As at 30 September 2008, the Group's financial position remained relatively unchanged from Q1, with total assets of R3.9 billion, total liabilities of R1.8 billion and shareholders' equity of R2.2 billion. At the end of the second quarter, the Group had cash and cash equivalents of R425 million.

Material Transactions

In terms of the Group's results, the fair value adjustment of the Aberdeen Loan was R9.6 million in Q2 F2009 compared to R16.9 million in Q1 F2009. During Q2 F2009 the Group earned interest on investments, bank balances and trust funds amounting to R13.3 million compared to R19.2 million for Q1 F2009 mainly as a result of reduced cash balances due to the Group's intensive capital growth (investment) programme.

Technical Reports updated

Subsequent to the end of Q2, Simmers published updated technical reports for BGM and TGME, while the results of the updated technical report were announced for FIU's Ezulwini Mine. The Simmers' reports reflect the Company's response to current challenges being faced by the mining industry and take into account the impact of rising costs in reagents, fuel and mining consumables, as well as the impact of safety-related issues and permitting delays on current production levels. Simmers' has also optimized its capital requirements for growth projects at TGME and BGM. The updated reports reflect a slower, more selective build-up of these projects to be largely funded from cash flow operations and outline a capital requirement of USUS$99.8 million over the next five years. Simmers is pursuing a number of external funding alternatives, which if successful, will allow the Company to accelerate the current capital programme and corresponding growth in production.

The economic assumptions were also updated. Based on an average long term gold price of USUS$757, a real discount rate of 8% and an exchange rate of R8.00 to the USUS$, the Net Present Value of the Simmers' gold assets increased 11% from R3 billion in April 2008, to R3.3 billion. The production profiles for all operations were amended to reflect a more realistic build-up within the current environment. The production forecast for F2009, previously reported as 255 000 attributable ounces, has been revised to between 190 000 and 200 000 ounces. This accommodates changes to the production schedule as a result of implementing improved safety measures at BGM, as well as taking into account the actual production for the year to date.

The full technical reports can be found on the respective website: www.simmers.co.za and www.firsturanium.com

Aberdeen Loan

In 2006 the Company entered into a loan agreement (the Loan Agreement) with Aberdeen International Inc. (Aberdeen), a Canadian exploration and royalty company trading on the Toronto Stock Exchange for an amount of USUS$10 million to finance the purchase of BGM. The loan has a 3% coupon up to a gold price of USUS$400/oz and 2.5% thereafter. In addition a Net Smelter Royalty (NSR) on BGM's gold production is charged, which is linked to the price of gold ranging from 0.5% NSR at USUS$300/oz to a 4.75% NSR at gold prices of USUS$750/oz or higher.

Simmers has the option of extending the term of the loan for an additional two years with a minimum repayment of 10% of the existing principal of the loan at the time of the extension. Aberdeen has the option to convert the debt into Simmers shares, subject to Simmers' shareholder approval, at R0.80 per share after the anniversary of the loan, which is repayable by 31 December 2008. In the event that such shareholder approval is not obtained within a reasonable period of time, the loan converts to a 1.0% NSR in perpetuity on gold produced from properties held by BGM, including the BGM Tailings, which were sold to First Uranium South Africa (FUSA).

In a letter dated 16 October 2008, Aberdeen confirmed to Simmers that it had elected to convert the amount of the facility outstanding into ordinary shares of Simmers. In terms of the provisions in the Loan Agreement, the facility is therefore no longer repayable in cash.

The Company is now following the process in terms of JSE listing requirements to formally complete the circular seeking shareholder approval.

Should shareholder approval not be forthcoming, the loan converts into a 1% NSR on BGM in perpetuity, as provided for in the Loan Agreement. Material financial effects will flow through to the Statement of Comprehensive Income pending the outcome of the vote by shareholders.

Aberdeen Dispute

The dispute between the Company and Aberdeen wherein Aberdeen alleged that Simmers was in breach of a right of first refusal held by Aberdeen to finance Simmers' properties, was dismissed with costs in favour of the Company by the High Court of South Africa in September 2008.

BUFFELSFONTEIN GOLD MINE LIMITED (BUFFELS OR BGM)

Overview

The mine is a wholly-owned subsidiary of Simmers, located in the Klerksdorp Goldfield of the Witwatersrand basin, some 160 kilometres south west of Johannesburg and exploits the Vaal Reef conglomerate for its gold production. The current focus is on the rehabilitation of the high-grade No.5 shaft which was damaged during a seismic event in 2005, and maximizing the value of surface deposits in the form of waste rock dumps.

Operational overview

BGM's gold output of 954.52 kg (30 688 oz) was as per guidance issued in Q1 and was 9.3% higher than the previous quarter despite having limited production from No. 2 shaft following a fatal accident at the end of August. This resulted in the shaft being closed for almost two weeks whereupon production was limited to 30% of planned output owing to the implementation of additional support elements in pillar areas. BGM's ability to make its target despite the closure was partially due to an 8% improvement in recovered yield from 3.57 g/t to 3.85 g/t.

The incident at No. 2 shaft also contributed to BGM's cash costs of USUS$909 per ounce, higher than the forecast range of between USUS$780 and USUS$800 per ounce. Significant costs were incurred at the mine, and particularly at No. 2 shaft where all access ways in seismic-prone pillar areas had to be re-supported. These additional support measures are over and above what is considered best practice in the industry. Production and costs were also negatively influenced by face length losses, particularly in high grade areas, caused by unexpected geological displacements. To counter this, additional drill machines were acquired to identify geological displacements timeously and thereby prevent face length and production losses.

A 4% increase in face length quarter on quarter, resulted in a 694 m² increase in square metres broken, which contributed to the increased underground tonnage. However, at 9.13 m, the average face advance for the second quarter was 2.6% lower than the previous quarter mainly due to the disruption at No. 2 shaft.

Development improved by 13.5% from 1 718m in Q1 F2009 to 1 950m in Q2 F2009 although opening-up operations were reduced in line with BGM's strategy to halt opening up of old access ways which have not advanced efficiently, and develop new access ways.

Capital Projects

In addition to the ongoing opening up and development programme to create additional face length, other capital projects at BGM include:

• The No.7 shaft refrigeration plant, which is due to be commissioned in Q3 of F2009, will allow access to high grade pillars at Nos. 5 and 7 shafts; increase overall production volumes and the average underground grade, as well as improve productivity as a result of improved environmental conditions;

• Phase 2 of the No. 5 shaft project continued during Q2 F2009, and will result in further high grade face length gains during Q3 F2009;

• The shaft rationalization programme aimed at the old Buffelsfontein shafts is targeted to reduce power consumption and overhead costs. It is scheduled for completion in Q3 F2009.

• The Kromdraai project is a development project initiated to access a large block of high-grade ground at the No. 2 shaft. This block of ground is estimated to be approximately 285 000 square metres in size at an average value of approximately 12 g/t containing 362 436 ounces of gold (11 273kg).