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Serial loss-making fluorspar-miner Sallies needs more funding
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25th October 2007
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JSE-listed fluorspar-miner Sallies, which had been funding continued losses through rights issues, would be requiring further funding, chairperson and now also CEO, Tom Dale, said on Thursday.

Dale said that the additional level of funding was still being calculated and would be communicated to shareholders as soon as it was available.

Presenting a net loss of R41-million for the year to June 30, Dale said that the central problem was that the company had been selling its quality fluorspar at prices below the cost of production. Sallies' fluorspar prices in future would not be below $200/t.

"We could have had higher selling prices and we are addressing that. Secondly, our high operating cost levels are related to numerous production problems," said the highly respected former Gencor executive, who replaced former CEO Izak Marais on October 1.

Also joining as full-time commercial director is Johann Blersch. Both will be attending a fluorspar conference in Frankfurt, Germany, from November 5-7, at which crucial fluorspar pricing will be discussed.

"I am conscious of the level of disappointment and frustration that Sallies shareholders are feeling," Dale said.

The message that Sallies would no longer be selling below its cost of production had already been put into the market and, if prices better than $200/t could not be obtained, Sallies would not be an exciting business, Dale said.

"Our product is superior to any other product emanating from South Africa and our contaminant levels lower than any other material coming out of South Africa.

"If our product is better, we shouldn't be getting lower prices, but higher prices," he said.

The company had been mining at below the 11%-12% cut-off grade at its flagship Witkop operation, where ore losses and waste dilution were running at 20% instead of 5%.

Dale believed that Sallies second operation, Buffalo, could add "very significant" value.

He described as "unacceptable" the publishing on October 18 of accounts that were due on September 30, but that the accounts had been in a "real mess".

He pledged that accounts would be published on time in future.

He admitted that the prediction made at the June 6 rights offer presentation to the effect that the loss in the second half of financial 2007 would be smaller than the R19-million of the first half, had been proved wrong, and that the losses had, in fact, worsened.

That was because prices were too low and the operating forecast had not been supported by reality.

Of the R75-million raised in the most recent rights issue, only R7-million remained as cash as at June 30, following the repayment of the bank overdraft, short-term loans and overdue creditors.

The R22,6-million operating loss from mining was virtually unchanged, despite the 26% increase in revenue to R109-million.

On the Honeywell arbitration, Dale said Sallies provisional view would be given to the litigants on Monday, January 14, 2008, when the company would be informed of the merits of its case.

That was likely to be followed by negotiation, which, if unsuccessful, would then revert to arbitration.

He said that he would be surprised if the case was concluded in the current financial year ending June 2008 and believed it would take longer than that.










Edited by: Martin Creamer

 

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Tom Dale
 
Picture by: Duane Daws
Tom Dale