Light at the end of the tunnel for 'stronger', recapitalised Sallies

5th June 2007 By: Matthew Hill

Struggling fluorspar-miner Sallies said on Tuesday that its production woes would soon be a thing of the past, and that it expected to post earnings of as much as R40-million for the 2008 fiscal year.

Now that it had a new, stronger management team, and working capital provided by a R75-million fully underwritten rights offer, which opened on June 11, the company was now “seeing some light”, newly-appointed chairperson Tom Dale said at a presentation, in Sandton.

The JSE-listed firm, which accounts for an estimated 10% of the western world’s fluorspar production, said that, should fluorspar prices remain strong, and the rand/dollar exchange rate remain around the R7,00/$1 level, Sallies would report earnings of between R30-million and R40-millionfor the 2008 financial year.

This would equate to five cents a share to 6,5 cents a share, which would migrate upward by two cents a share for each additional $10 hat the fluorspar producer received for its product.

And CEO Izak Marais said that the company was paying considerable attention to the quality of its product, which would allow it to achieve optimum prices.

To this end, Sallies had stockpiled 200 000 t of run-of-mine fluorspar at its flagship Witkop project, which would allow it to optimise the blends that it fed its crusher and processing plant.

Witkop mining right expected Monday

Meanwhile, in an interview with Mining Weekly Online, Marais said that he expected to receive Sallies mining right conversion for Witkop on June 11.

Sallies was due to meet with Department of Minerals and Energy officials to sign the necessary documentation for the converted mining right on Monday.

“It is a formality really, there are no outstanding processes, we have cleared that up,” he said.

Sallies had also submitted an application for the conversion of the mining right at its Buffalo operation, and an exploration right for parts of the orebody that had not yet been mined or explored.

Sallies eyes piece of mooted HF plant cake

Marais also commented that he would be “very surprised” if Sallies did not supply a proposed hydrofluoric (HF) acid plant, to be built in Richards Bay, with fluorspar, as HF acid producers required a blend of feedstock, from more than just one mine.

Diversified miner, and the country’s other major fluorspar producer Metorex, announced on February 19 that the Nuclear Energy Corporation of South Africa was carrying out a feasibility study to build an HF acid plant, worth as much as R500-million, at Richards Bay.

Metorex, a partner in the project, had said that it would require the firm to expand its Vergenoeg fluorspar mine, north of Pretoria, by some 70 000 t/y to supply enough fluorspar.

Construction of the plant could be completed some time between August 2009 and August 2010, which was when it would require Vergenoeg to begin feeding it fluorspar.

However, Marais said that HF acid producers required product from more than one mine in order to achieve the correct feedstock specifications.

“There’s not an HF producer in the world that produces using only Vergenoeg material,” he said.

“People blend the product. They buy from Witkop, Buffalo and Vergenoeg and blend it,” Marais added.

“The fact that Metorex are involved on an investment level does not exclude us from being involved on a supply level,” he stated.

Further, Marais said that the blend could be one part Vergenoeg to one part Witkop, with one part of Buffalo’s fluorspar for every three of the other mines’ product.

“We would like to see that we remain involved in any beneficiation processes,” he highlighted.

Marais also suggested that government should allow Sallies’ involvement in the proposed HF plant.

“I would be very surprised if government was comfortable with only one of the two major local fluorspar suppliers benefiting from the beneficiation project,” he said. “The country’s definitely not big enough for a second HF process.”

However, the company was first focused on getting all its production ducks in a row before it considered new beneficiation opportunities.

“First we want to make sure that everything at home is covered and dry,” Marais stated.

Shares in Sallies closed flat on Tuesday, at R1,11 a share.