can hdn get one of sgw's tantalum mines?

Dispute stalls Gwalia deal

NEALE PRIOR





Sons of Gwalia's administrators said yesterday they would have to wait until a row with major customer Cabot was resolved before deciding on a re-float or sale of the collapsed mining group's tantalum assets.

Co-administrator Andrew Love said that with the tantalum market having so few players, it was not possible for Gwalia to sever its relationship with Cabot and instead its dispute over contract prices with the US group would go to arbitration in London next month.

"Alongside that we are having discussions with them to explore the prospects or otherwise of seeing if we can reach some negotiated settlement," Mr Love said.

The outcome of the arbitration and the fate of the tantalum assets are among the biggest factors in determining what return creditors will get from the $1 billion collapse.

Gwalia, which failed a year ago under the weight of botched foreign exchange and gold hedging contracts, is the world's biggest producer of tantalum, used in mobile phones and computers.

Together with the company's industrial mineral interests, analysts believe the assets could fetch up to $500 million in a trade sale.

Also yesterday, the administrators defended their conduct in running a test case in NSW in which they are asking for court orders that shareholders who claim to be victims of non-disclosure by Gwalia's board not be allowed to make claims as creditors of the group.

Gwalia faces claims of more than $500 million from mainly US creditors, who were counterparties to the loss-making hedging and oppose claims from shareholders being admitted for fear that they will dilute the final payout to creditors.

Despite initially being appointed under the 28-day voluntary administration process, Mr Love and his co-administrators from Ferrier Hodgson, Garry Trevor and Darren Weaver, have gained a series of extensions from the WA Supreme Court that has allowed them to keep the company in administration and to put forward a deed of arrangement pending a final decision on the tantalum assets.

A report to creditors this week disclosed that the firm collected $6.8 million in fees in the prolonged administration from August 29 last year to July 31, including more than 4580 hours of work by partners at an average hourly rate of $413.

Mr Love said his group did not have any reason to defend the fees in light of the work they had done, the investigations charged and the reasonableness of the hourly rate.

He said the total bill would depend on the outcome of the Cabot arbitration and the tantalum sale, on how much litigation would occur and whether the shareholder test case went to the High Court. The administrators have already launched breach of duty legal proceedings against former directors Peter and Chris Lalor and against audit firm Ernst & Young for its alleged repeated failure to detect problems with the company's gold and forex hedging activities.

The Lalors and Ernst & Young have said they would defend the cases against them. The Lalors have said they disagreed vehemently with the conclusions reached by the administrators and did not believe the creditors report, which detailed potential claims, was balanced or fair.

Mr Love stood by the 185-page document yesterday, saying the comments by the parties named in the report were entirely predictable. "It is going to be tested in the courts and we are quite comfortable with the position that has been put," he said.

The writs against Ernst & Young and the Lalors have not been served but the shareholder test case will be heard in Sydney on August 29.

Veteran litigation funder Hugh McLernon, whose listed group IMF (Australia) is backing 400 peeved shareholders, said he was concerned the administrators had sided with the big creditors who did not want the claims from burnt creditors included in the creditor pool. He said the administrators should have remained neutral in the test case.

Mr Love said the administrators had conducted the test case on the basis of legal advice from law firm Freehills and because there was a clear conflict between Australian law, an English High Court case and a side comment by a Federal Court judge in another case.
http://www.thewest.com.au/20050820/busines...-sto132018.html