Just found this on another site. Interesting stuff. To think...

Just found this on another site. Interesting stuff. To think that any trader that was involved in SGW in the dying months was playing with air. As thats all it was worth. Be interesting to know of the repercussions in the Franklins camp who increased their position substantially right before the demise. You don't work for Franklins do you singedass or did?........lol

Australian Shareholders Association Media release



7/9/2004

Where was the warning!

The appointment of administrators to Sons of Gwalia last week was notable not so much for the company’s failure but for the absence of any warning it was about to happen.

The company’s shares were suddenly suspended with the price at $1.30 and with a market capitalisation of $245 million, when in fact the value of the company was $0. On their same fateful suspension day, HIH was down to 17 cents and Pasminco 5 cents.

Under the continuous disclosure regime this value mismatch simply should not happen, and directors' statements - in combination with recent share sales - should be investigated by Asic with vigor.

The key questions for the authorities are: did directors and management know the company was in trouble and did the board keep the market informed?

A review of the SGW announcements over the last six months provides little, if any, indication the company was sliding into oblivion.

A release by the company in March reiterated problems identified earlier with a slippage at the Tarmoola mine, but did not sound any alarm bells.

Indeed a month later and despite a disappointing third quarter, directors were forecasting that a better June quarter would enable the company to meet annual targets.

A large tantalum sale in May gave the company cause for an upbeat announcement; the sale was a further indication of an improving market for tantalum and positioned the company in a "strong and expanding market".

On July 14 the company released its fourth quarter report and commented on the outlook for earnings in 2004/05. A declining "production profile" for the gold business was expected to continue and tantalum operations were impacted by lower grade and recovery.

Nonetheless, profit after tax was expected to be $21-22 million for 2003/04 and about the same in 2004/05. Although earnings forecasts were being wound back, there was no mention of red ink.

Instead the release indicated that work continued on a strategic review of the company’s business and the company was not going to provide guidance on the earnings outlook until conclusion of the review.

The company’s MD is on record as saying at that time "basically we are in a period of transition now over the next couple of years as we work through the issues that are historic in the organisation and then try and get on a platform to go forward."

It is entirely understandable therefore, that shareholders are angry about the sudden demise of their company. There was just nothing to alert them.

At the same time the regulators may want to examine whether company reporting on the ramifications of its gold hedging measures was adequate. These measures were complex and appear to have led to the company’s downfall.

Did shareholders, even large sophisticated shareholders, understand the hedging activities and their impact on the profitability, position and prospects of SGW?

While recognising the special roles of the administrators on the one hand and the regulators on the other, shareholders should be entitled to straight answers from the company’s directors, both past and present.

To add insult to injury, administrators Ferrier Hodgson have no power to crystallise capital losses for tax purposes. Shareholders may have to wait years for the company's assets to be sold off and a liquidator to be appointed. And it's not often in the administrator's interest to speed the process up.

Shareholders now face the triple indignation of losing their money, not knowing how they lost it, and having to wait years to claim a tax loss.