Sallies promises H2 recovery after loss widens

31st March 2008 By: Olivia Soraya Spadavecchia

Fluorspar-miner Sallies reported a net loss before taxation of R26-million for the first half of the 2008 financial year, compared with the loss of R19-million for the same period in 2007. Of this figure, R15-million was attributable to Witkop and R11-million to Buffalo.

The company said that it expected management effectiveness to support a recovery during the second half of the year. But chairperson and CEO Tom Dale acknowledged that his dual role was "unacceptable", adding that this should be changed by January next year.

Sallies explained in a statement to shareholders that future profits were highly geared to the rand price achieved for fluorspar sales, higher product volumes at Witkop and the successful implementation of the Buffalo re-engineering recommendations.

All Witkop's expected production for this calendar year, except the previous year's carry overs, had been sold on contract at prices well above $200 a dry ton. Sallies noted that negotiations for the delivery of Witkop material next year were in progress.

"Beyond April 2008, when existing supply commitments entered into at uneconomical prices have been honoured, there are as yet no contracts in place for Buffalo, although enquiries for this material are being processed. One of the challenges for the team re-engineering the Buffalo project is to reduce the levels of phosphates and other by-products in its fluorspar with the objective of reducing the price discount on this material," the company said.

With regard to its outlook, Sallies said that significant progress had been made since October, 2007, adding that rand prices being achieved by Witkop would rapidly turn Witkop's fortunes around from the fourth quarter of this financial year.

"Provided current volumes being achieved at Witkop can be further improved and the Honeywell litigation is resolved fairly, management will establish a foundation for building a mining business. If the two remaining real technical challenges at Buffalo can be overcome and the exploration licence referred to above is secured, the outlook for Sallies will improve significantly."