A bright 2007 for battered Sallies

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A bright 2007 for battered Sallies
Allan Seccombe
Posted: Tue, 28 Mar 2006

[miningmx.com] -- Fluorspar producer Sallies has started test work on dump material at the defunct Buffalo Fluorspar Mine ahead of a decision whether to purchase the operation and give the company a welcome step up in production, CEO Izak Marais said on Tuesday.

Sallies, which chairman Peter Flack says has come through its toughest six months yet, could be a very different company in little more than a year, with some analysts forecasting a doubling in its share price.

In recent weeks Sallies has been awarded new order mining rights to the Buffelshoek deposit at its Witkop mine near Zeerust, it has a 30% empowerment partner lined up and it is raising R65m through a rights offer that will clear its R10m debt and fund the purchase of Buffalo near Naboomspruit.

�At Buffalo, we are getting the plant, which is in such good condition, started, and by the end of April we�ll have a clear indication of whether the recoveries are possible,� Marais told Miningmx.

�By the end of this financial year (June) we want to be producing from Buffalo or have shut the door on that project.�

Management will conduct a pre-feasibility study on mining at Buffalo, which was halted by Gencor in 1994.

Calendar 2007 could be a very good year for them

Buffalo could produce up to 6,000 tonnes a month, but Sallies� metallurgists think improvements to the treatment process could be made to increase that slightly.

�We will possibly turn Buffalo into a fluorspar producer of note,� Marais said.

However, the next six months to Sallies� year end in June will still be pretty rough but not as tough as the interim period. Full-year output will be 120,000 tonnes versus a forecast 170,000 tonnes for this financial year as it awaits the higher grade Buffelshoek material through its plant. It has an old problematic crushing plant and had water quality issues up to end-November.

Nick Goodwin, a mining analyst at T-Sec, said recent changes in the company and the addition of Buffalo would turn around the company�s dismal run of financial results.

�Calendar 2007 could be a very good year for them. They�ll be getting $200 a tonne for their Zeerust fluorspar, production will be up to 180,000 tonnes and there�ll be production from Buffalo,� Goodwin said. �By June next year the shares will be R1.50 per share.�

Sallies shares were trading four percent lower at 73 cents each late in the Tuesday session on the JSE. They earlier touched a day low of 68 cents.

Sallies has been talking to a Japanese maker of fuel cells about a steady supply of fluorspar, which is used in the membranes of the cells, said Marais. The Japanese would like to secure 30,000 tonnes per year over ten years.

�Our product is certainly comparable� they are very happy with the specifications we have. They keep on about the consistency of supply,� said Marais, adding it was still very early in the process to say if a contract would be agreed.

The nuclear industry uses hydrofluoric acid, which is fluorspar combined with sulphuric acid, to purify uranium. Considering a shift in world thinking away from fossil fuels for energy generation, there could be an increased demand for fluorspar.

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Fluorspar prices are expected to continue rising as supply from China, the world�s largest producer of the mineral, continues to be restricted through export quotas and potential supply hiccups.

The fluorspar could rise to $200/tonne by the end of the 2006 calendar year from around $170 now, as other factors like an 80,000 tonne/year European producer unexpectedly ceased production contributed to disturbances in the market.

�No one we speak to sees a reduction in the price for a long time to come,� he said.

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