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SAL
SAL
Sallies Limited - Sallies Terimates Onerous Honeywell Contract
Sallies Limited
(Incorporated in the Republic of South Africa)
(Registration number 1903/001879/06)
JSE share code: SAL
ISIN: ZAE000022588
SALLIES TERMINATES ONEROUS HONEYWELL CONTRACT
Johannesburg, 20 January 2006 - Fluorspar miner Sallies today terminated its
supply agreement with Honeywell after Honeywell had failed to make overdue
payments and remedy other material contract breaches.
Honeywell has consumed more than half of Sallies" annual output for the past
five years at prices well below the market rate - the supply agreement was
officially defined as "onerous" in terms of South African GAAP last year - and
the cancellation of the contract will free up this production for sale at more
favourable rates.
Chief executive Izak Marais noted that Honeywell believed the agreement capped
the price at US$116/tonne while the current spot price was around US$170/tonne.
With other buyers readily available in the buoyant international fluorspar
market, the termination of supplies to Honeywell would therefore have an
immediately beneficial impact on the company"s revenue. Sallies has been
struggling in recent times against the combined effect of the Honeywell burden
and the strong rand, posting a loss of R31 million for the financial year to
June 2005.
"As we have told the market, we have been in discussions with Honeywell for the
best part of a year in an attempt to obtain some relief from the stranglehold of
a long-term contract that was negotiated at a time when the spot price of
fluorspar was US$107/tonne and the rand was at 10.53 to the dollar.
Essentially, however, they have been indifferent to our plight," Marais said.
"Furthermore, On November 21 we advised them that an amount of more than US$1
million owing to us for past shipments was overdue, part of it for more than six
months, and that their failure to comply with the agreed payment terms
constituted a material breach of the contract. They were given 30 days to
rectify this situation. By January 11 we still had not heard from them so we
gave them further notice that unless we were paid in full by January 19, we
would terminate the agreement and seek to recover the money due to us. We have
not received their payment - or indeed had any communication from them about
this matter - so we have now cancelled the contract."
Sallies produces about 150 000 tonnes of acid grade fluorspar per year at its
Witkop mine, virtually all of which is exported.
For further information call
Izak Marais on 083 298 2000
Issued by du Plessis Associates on behalf of Sallies Limited.
dPA contact Helen McKane on Tel : +27 11 728 4701, Fax: +27 11 728 2547 or e-
mail: sallies@dpapr.com
Date: 20/01/2006 09:00:12 AM Produced by the JSE SENS Department
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