Sallies to grow US market

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� Sallies sailing close to the edge
� Trouble brewing at Sallies
� Sallies still ideally positioned - Izak Marais, CEO, Sallies
� Sallies to launch R75m rights offer

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Sallies to grow US market
Allan Seccombe
Posted: Thu, 19 Apr 2007

[miningmx.com] -- FLUORSPAR producer Sallies is shipping test samples of its high-grade material to Alcoa, Alcan and Du Pont in an effort to regain a North American client after two previous relationships ended badly.

Sallies has also let a potential acquisition in Australia pass because it needs to keep management focused on its troubled South African operations.

Sallies lost Alcoa as a client around 2002 because it was unable to maintain the consistently high specifications required of its fluorspar. The other customer, Honeywell, had managed to secure prices well below market prices and took more than half Sallies� production, something which became onerous as prices began to rise.

Sallies terminated the contract last year after Honeywell allegedly failed to make a payment. Honeywell is now pursuing a claim of $6.7m against Sallies in the International Chamber of Commerce in Zurich. The hearing will start in the first week of May.

trying to win Alcoa back

"We are trying to win Alcoa back as a customer,� said Sallies CEO Izak Marais.

A trial shipment of high-grade fluorspar suitable for the production of aluminium fluoride will be sent to North America in May, with a second trial shipment to another customer later in the year. Another two shipments will be sent to the third potential client.

�It�s important to get these to them now so that they can do all the necessary test work. We will know before September/October when it comes time to sign contracts for the new year,� Marais told Miningmx on the sidelines of Sallies interim results presentation.

Sallies has had a spell of difficult operating performances, which has throttled production. Output fell to 30,150 tonnes in the first six months of 2006 from 71,300 tonnes in the same period in 2005.

Production picked up in the second half to 58,000 tonnes in the second half of 2006 and Marais forecast production rising to between 60,000 and 70,000 tonnes in the first six months of 2007.

In the second half of 2007, production should reach 84,000 tonnes, the majority of which, some 66,000 tonnes, will come from the high-grade Witkop mine, Marais said.

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�We want to focus the Witkop product at the aluminium fluoride market because the quality is so high,� Marais said.

The trick for Sallies will be to achieve steady state production if it does secure the US contract, which could result in offtake of 40,000 tonnes a year.

�Our production has not been roaringly successful in the past six months even though it was better than the previous six months. But it�s an expression of our confidence in what we are doing to increase production that we are looking to conclude new supply contracts,� Marais said.

The existing suppliers to the three aluminium companies are in China and Mexico, but the Chinese supplies are becoming unreliable and more expensive, he said.

�These North American companies are looking for a reliable supplier of quality product. That�s what we are convincing them we are,� he said.

�We are 90% sure that we have resolved our issues. With our refinancing programme through the rights offer we are putting in back up in our mines where no back up existed before,�

Sallies will complete a right issue in June to raise R75m, the lion share of which will go towards settling R45m of current liabilities.

�It�s the first time Sallies has calculated what it needs financially plus a reserve. In the past, it raised what it needed to get it out of trouble,� he said referring to the R110m raised around this time last year to pay for its Buffalo mine and pay down debt.

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