Gwalia placed in limboNigel Wilson, Energy writerAugust 31,...

Gwalia placed in limbo
Nigel Wilson, Energy writer
August 31, 2005
CREDITORS of failed gold and tantalum miner, Sons of Gwalia, yesterday approved a deed of arrangement that puts the company into limbo pending legal efforts by shareholders to be classed as creditors.

Ian Hobson, of administrators Ferrier Hodgson, said yesterday the arrangement would also allow time for the arbitration of a contract price dispute between Sons of Gwalia and its tantalum buyer, Cabot.

Mr Hobson said he expected the arbitration to be finalised by November, clearing the way for the mooted sale of the assets.

Fewer than 50 of the more than 1000 creditors collectively owed more than $1 billion turned up for the meeting in Perth. They voted unanimously for the deed, which allows Ferrier Hodgson to continue to act within the company until the issues are resolved.

Last month in a 185-page report Ferrier Hodgson said the founders of Sons of Gwalia, brothers Peter and Chris Lalor, were negligent and had breached their duty of care in the lead-up to last year's collapse. The brothers have denied the allegations.









The administrators sold Sons of Gawlia's gold assets to St Barbara Mines in March for $38 million and its base metal properties to Minara Resources for $3 million in July.

Their report said the tantalum business could not be sold or restructured until the dispute with Cabot was settled, because the price determination for the supply contract would be a key factor in determining the value of the minerals division. By the time it collapsed last August, Sons of Gwalia had liabilities of $862 million.

But Ferrier Hodgson have estimated the minerals division, including tantalum and lithium, has a carrying value of $460 million.

Hugh McLernon, managing director of litigation funder IMF Australia, said yesterday he expected the shareholders issue to take some time to resolve.

IMF Australia is funding an action in the Federal Court in NSW on behalf of 400 Sons of Gwalia shareholders, led by Luka Margeretic, who are seeking to prove they are unsecured creditors.

The test case was heard yesterday but Justice Arthur Emmett reserved decision.

If successful, the shareholders may stand a chance at redeeming lost money. Mr McLernon said whichever way the judgment went he expected the issue eventually to go to the High Court.

"There will be appeal on appeal in the Federal Court and I expect that if it goes to the High Court it will take a year or so for a final determination," he said.

Creditors and their legal representatives said later the discussion was orderly and there was no view opposed to Ferrier Hodgson's proposal.

One creditor, Leo Kaczmarczyk, interviewed before the meeting, said he was very disappointed.

"We don't think we are going to get anything back, or if we do, it will be a very small amount," he said. "I think there are a lot of people that are really going to be screaming."

with AAP