Thursday, January 22, 2009

Sallies Expects To Move Back Into Profit

South African fluorspar miner Sallies is expected to report its first annual profit in seven years in the 12 months to June, due to higher fluorspar production, favourable exchange rates and better prices, chief executive Tom Dale said yesterday.

Speaking after the company's annual meeting, Dale said Sallies was likely to generate operating and bottom line profit for the half-year to December and the full-year to June.

Sallies has only ever been profitable in three years - from June 1999 to June 2002 - and last reported a net profit - of almost R4.6 million - in the year to June 2002. Over the six consecutive years to last June, the company had an accumulated loss of R183.4 million, including a record loss of R42.4 million in the year to June 2008.

The company has never yet paid any dividend.

Sallies' sole asset is the Witkop mine in North West, where it mines acid grade fluorspar, which is used to make hydrofluoric acid.

Dale said Sallies had managed to turn from huge losses to a profit because of the closure of the Buffalo mine in Limpopo in October, improved information systems and better management.

"The operation of Witkop is like chalk and cheese," Dale said. Although water had been a problem for Sallies in the past, Dale said improved supplies had resulted in Witkop losing only one day of work in the past six months.

However, Dale cautioned that the mine, which employed fewer than 300 people, remained an operation with a "low, variable" extraction rate. In the year to June, Sallies would spend R30 million on capital investment, he added. At the end of last June, Sallies had cash reserves of R25.4 million.

Dale said the current cash position was "very healthy" despite the firm's capital spending programme.

In January 2006, Sallies halted a contract for the supply of fluorspar to a US company, Honeywell. That termination led to a dispute between the two companies, which has since gone for arbitration.

Honeywell is claiming $4.5 million (R45 million at yesterday's exchange rate) plus interest and costs, while Sallies has a counterclaim for $3.8 mil¬lion plus interest and costs.

Dale said the outcome of the arbitration hearing was likely by the end of next month.

Source: Business Report, South Africa

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