www.geocities.com/tantalumtantalum/CIBCSGW.pdf is a gem of a review of SGW by CIBC in mid-2001 when SGW was just coming off its all time of $10. I was not shown it until a few months ago.
Given how hard the Lalors used to make it for anyone to say anything negative about SGW (including by threatening legal action), it was a brave, timely and illuminating "sell" recommendation. Two key points included:
(1) - Greenbushes grades dropping and production costs doubling from A$35 in 2001 to A$71 by 2006.
(2) - Wodgina to be mined out by the end of this decade.
SGW is now bankrupt and has nothing left but its tantalum operations, which are continuing to produce, but which have an uncertain future. Greenbushes has a contract, but is technically not profitable, all things being equal. Wodgina is viable, but has a limited mine life and with the contract with its main customer, Cabot, now subject to an increasingly desperate (for both sides) arbitration battle, SGW is struggling at best.
Cabot has just released its latest report and maintains that a change in how it will be doing business means it can "sell significantly greater amounts of tantalum". It also states, however, that should SGW win the arbitration, Cabot might have an "obligation to buy tantalum ore at well above current prices for a five year period." (note - Wodgina was due to have been mined out by about then)
GIP has a five year contract with an unspecified party. It's project is viable with just the tin and tantalum and it could be the world's cheapest, legal tantalum miner by a wide margin if it can sell the feldspar as well, which an unspecified consumer has expressed a firm interest in buying although not immediately. GIP has enough resources in its two tantalum-tin-feldspar mines to supply customers for decades to come and labour and fuel costs are roughly an order of magnitude less than those in Australia. GIP is also drilling its other nine ex-gold-copper-nickel mines as part of its original plan to provide add to cash flow. The original intention was for a spin off to benefit the company, its partner and shareholders.
TAA has cried wolf once too often and is reviewing its "virtual reality" operations.
HDN has lost its contract to SGW. Unlike other better known players, it has enough cash to survive comfortably for a while, but now has to look for customers and is running low on feed stock, so is going prospecting again.
SGW is bankrupt and struggling to maintain viable operations pending possible sale. The world can't afford to have them fail completely just yet as no other company can take their place at the moment, but that could change soon.
The war torn Congo remains politically out of favour for a number of good reasons.
GIP continues to trade at higher prices and volumes in London compared to Australia, while news on tantalum related finance and / or gold drilling results are awaited. If SGW failed completely in the short to medium term, GIP could take its place, but a more likely outcome is for GIP to become the world's second biggest tantalum producer and third biggest feldspar producer.
Footnote: On 23/11/2005, awards will be given out at the Mines & Money conference in London. GIP is in the running for the "Pioneering Award", which is an award for "the company that has shown the greatest originality in the search for minerals in 2005". Voting closes on Monday www.mines-and-money.co.uk/2005/voting.htm . It's an Academy Awards of sorts www.minesandmoney.co.uk , for which the claim is made "it's the leading mining investment event that connects miners with capital and capital with mining".
(As an aside, I now wonder a little about that funding dependent delay to mid-November in the rechecking of grades. We were put off the scent a bit before the announcement about the nine-ex-mines being granted for free around the time of the AIM listing).
AR1 Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
(20min delay)