Sallies Limited - Sallies Seeks Relief From Onerous Contract
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1903/001879/06
JSE Share Code: SAL
ISIN: ZAE000022588
For further information call
Lindsay Robertson on 082 807 7709
SALLIES SEEKS RELIEF FROM ONEROUS CONTRACT
Johannesburg, 23 March 2005 - Fluorspar miner Sallies has appealed to major
customer Honeywell for relief from the crippling terms of a supply contract
which will cost the exchange rate-embattled company more than R22 million to
complete.
Reporting its interim results to December today, Sallies said in terms of South
African GAAP its agreement with Honeywell had been defined as an `onerous
contract` and it had consequently made a provision of R22.7 million in the
accounts for the projected loss to completion. The company reported a net loss
of R23.2 million for the period (six months to December 2003: R8.6 million) on
a revenue of R50 million (R44.6 million.)
Chief executive Lindsay Robertson said when the five-year Honeywell contract had
been negotiated by the company`s previous management in 2000, it was capped at
US$116/tonne at a time when the spot price of fluorspar was US$107/tonne and the
rand was at 10.53 to the dollar. The spot price is currently at the
US$170/tonne level and the exchange rate is around 6.
`What seemed like a good deal back in 2000 is now anything but, and we`re losing
money on every tonne we ship to Honeywell, which consumes almost half of our
total production. We`ve therefore asked Honeywell either to suspend the
contract until such time as the exchange rate enables us to execute it
profitably, or to enter into a renegotiation of its terms. They`re still
considering their response,` Robertson said.
`The exchange rate has obviously put a lot of pressure on Sallies, but the
irony is that even at current rand/dollar levels, the company would be
profitable were it not for its biggest contract. The fluorspar market is
buoyant and the remedial measures we initiated at the Witkop mine in 2003 have
greatly improved its performance. Compared to the six months to December 2003,
ore mined has increased by 35% to 832 000 tonnes and tonnes milled by 33% to 732
000, while mining costs per tonne have been reduced by almost 20% to R15.45.
The substantial operational advances we`ve achieved have, however, been negated
by an increasingly unfavourable exchange rate and the impact of that on the
Honeywell contract price.`
Robertson said the company`s prospects for the second half of the year were
entirely dependent on the outcome of its discussions with Honeywell.
Issued by du Plessis Associates on behalf of Sallies Limited.
dPA contact Kathy du Plessis on Tel : +27 11 728 4701,
Fax: +27 11 728 2547 or e-mail: sallies@dpapr.com
Date: 23/03/2005 01:02:04 PM
Produced by the JSE SENS Department
Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information.
