Sallies closes shop at Witkop

Brendan Ryan | Fri, 26 Jun 2009 17:59
[miningmx.com] -- FLUORSPAR producer Sallies has shut down operations at its Witkop mine because of the collapse in demand for acid grade fluorspar caused by the global economic downturn.

Sallies CEO Tom Dale said on Friday the mine had been mothballed to preserve the firm’s cash position. He declined to give details of Sallies’ liquidity ahead of release of its results for the year to end-June.

The company showed cash and cash equivalents on hand of R12m at the end of December. It made an operating profit of R46m for the six months to end-December, but showed a net loss of R61.6m after taking an impairment charge against its Buffalo fluorspar mine.

Dale said many international fluorspar consumers had been de-stocking since November 2008 but still had sufficient stocks to continue operations because of their lower production levels.

“New demand for acid grade fluorspar has collapsed and, despite concerted efforts by management and its market agent, Witkop has been unable to secure future orders,” Dale said.

He added Witkop had already produced enough fluorspar to meet its contractual obligations until the end of 2009. There appeared “no other viable option but for production to be suspended with immediate effect in order to conserve cash”.

Dale said the decision to shut down operations immediately would not prejudice the rights of employees, who had been given notice of the 60-day consultation period required by legislation on retrenchments.

A statement issued by Sallies noted that “in the interim, management is actively pursuing opportunities for corporate activity precipitated by the world recession”.

Asked to elaborate, Dale said: “ Anything could happen. A sale of the company is one option, but not at anything like current share price levels.

“The Witkop mine is now in great shape and is a good asset, although it is not a low cost producer. Fluorspar is still a necessary feedstock. What happens next really depends on what happens to the world economy.”

Sallies closed on the JSE at 25c a share on Friday. This is just above its 12-month low of 23c, and compares with a 12-month high of 89c.