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We are in that critical transition phase - Izak Marais, Sallies CEO

In an interview on Radio 2000 @ 18:00 on Friday, 20 January, 2006

[miningmx.com] -- SALLIES, the South African fluorspar producer, said it was critical the company secured new order mining rights to the high-grade Buffelshoek deposit which is adjacent to Wintershoek, the deposit from which it currently produces 170,000 tons/year.

According to Izak Marais, Sallies CEO, production from Buffelshoek will be used to maintain production when Wintershoek’s supplies start to dwindle. The two deposits comprise the Witkop mine which was formerly owned by Phelps Dodge.

Fluorspar is used in the manufacture of cooling gases used in refrigerators and air conditioning systems.

“We are now in that critical transition phase where we need to get into Buffelshoek to be able to meet our production targets,” said Marais. He was speaking on Moneyweb’s Power Hour, a week nightly radio programme.

Securing mining rights to the new deposit is dependent on winning the support of South Africa’s minerals and energy department which must approve the company’s environmental and empowerment plans. The company wanted to secure the mining license in October, but was unable to meet that deadline, Marais said.

“We are in sort of final days for the Minister to make a decision. But unfortunately we were not able to secure it as quickly as we were hoping to do, which was by about October last year.”

Sallies’ fortunes are much improved after the company was able to extract itself from a five-year supply agreement with Honeywell, a US company that imports fluorspar. The supply agreement capped the price of Sallies’ fluorspar at about $117/t against a blossoming spot price of $170/t.
we’ve made sure we dotted the i’s
The contract with Honeywell was closed after the company failed to pay Sallies for a shipment, worth about $1m. However, Sallies expected this would not be the end of the matter.

“One would imagine that a large company like that [Honeywell] would try and argue that the cancellation of the contract was not allowed and not a good thing. And I would be very surprised if they wouldn’t try and make such claims.

“But we’ve made very sure that we dotted the i’s and crossed the t’s when it came to the legal side. We sought extensive legal opinion on the matter, both locally and internationally,” said Marais.