Sallies talks tough on fluorspar market

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Tom Dale, Sallies CEO

� Sallies to raise yet more cash to stay afloat
� Sallies in dramatic share free fall
� Sallies outlines growth strategy
� Sallies boss quits as firm fails to improve
� Sallies' Marais given ultimatum
� Sallies' run of misery continues unabated

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Sallies talks tough on fluorspar market
Allan Seccombe
Posted: Thu, 25 Oct 2007

[miningmx.com] -- SOUTH African fluorspar producer Sallies, which has had a torrid couple of years, is demanding higher prices for its products as it undertakes a complete overhaul of the faltering business.

New CEO Tom Dale didn�t mince his words as he laid out the new strategy for dealing with customers and sorting out the problems besetting South Africa�s second-largest fluorspar producer.

�I think we�ve been getting screwed and it�s not going to happen anymore,� he told a results presentation in Johannesburg.

we�ve been getting screwed

He was referring to the sweetheart deals struck by the company in which fluorspar is being sold well below what Metorex�s Vergenoeg mine is achieving, let alone what it takes to produce the fluorspar.

�We know people are getting much higher prices for material inferior in quality to ours and I don�t understand whey we are getting much less than $200 a tonne,� he said.

Dale, an old Africa mining hand, said Sallies� largest customer had already been told that it must pay more than $200/tonne for product. The answer to that demand is not yet known.

Sallies is producing fluorspar, used to make refrigerant gases and in aluminium and steel manufacturing, at a cost well north of $175/tonne. It has contracts for the remainder of calendar 2007 to sell its fluorspar at $170 per dry tonne. It is obliged to sell 21,000 tonnes of fluorspar in the first half of calendar 2008 at $165/tonne.

Sallies produced 107,238 tonnes of all grades of fluorspar in the financial year to end-June 2007. It sold 98,705 tonnes.

Fluorspar buyers and sellers are meeting in Frankfurt from the 3rd to the 5th of November to thrash out prices. Sallies is taking a tough stance.

�We have put it into the market place that we will not be selling at prices below cost and will not sell at historic price levels. Whether we get the prices we want remains to be seen,� Dale said, adding the previous setters of prices within Sallies had left the company.

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Dale took over after the resignation of CEO Izak Marais on 1 October. Without directly blaming Marais, Dale said the company was a complete shambles operationally and financially when he and partner Johann Blersch joined.

�The accounts were a real mess,� he said, adding a complete overhaul of the financial systems and management information process would be completed in a week�s time.

This would give management the data it needs to calculate how much more money needs to be poured into the company. The R75m it raised in a rights issue in July has been sucked up in paying down debt.

Dale told Miningmx the extent and method of the capital raising would be made known to shareholders before the end of December this year.

US fluorspar consumer Honeywell and Sallies are engaged in arbitration to settle a dispute over a supply contract and pricing. The matter has been heard and both parties have asked that the merits of the case be made known.

This will happen on 14 January. Both sides will take that information and begin negotiations again. If those fail the matter goes back into arbitration.

�I�d be very surprised if this is finished by June 2008,� Dale said. Sallies has made no provisions in its finances for the process going in Honeywell�s favour.

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