sgw placement solution

GDA management must have been in a quandary over recent months with funds running dry, the share price drifting down to sub 1c levels and having flagged that they would need to raise funds, the question was always going to be how to do this in a way that would be attractive for investors.

Over recent weeks we have seen a bit of activity with the SP trying hard to push North but it is still short on levels that may be considered attractive for new investors.

As mentioned in a previous post there is speculation that GDA would get first option on SGWs Southern Cross holdings in WA where they share tenements.

http://www.asx.com.au/asxpdf/20030710/pdf/3hdchr04vs06v.pdf

Should this proceed this would provide GDA with the perfect "placement solution" raising funds to purchase additional resources, and supplement the exploration kitty at the same time.

Whilst this post may on the surface appear a bit cynical, should such acquisitions proceed there is the potential for GDA to rise from SGWs ashes as a solid gold producer in WA, maybe purchasing already established SGW processing facilities for both new acquisitions as well as already known resources at Buffalo and Virgin.

The following article appeared in Wednesday's AFR and would appear to back up the notion that SGW may be looking at selling off their WA gold holdings.

Break-up of Gwalia on cards
Author: Ian Howarth
Date: 01/09/2004

Sons of Gwalia is almost certain to be broken up and sold as the creditors seek to recover almost $800million in outstanding debts related to the company's gold hedging program, leaving shareholders with almost no hope of recovering any of their investment.

The group's gold assets in Western Australia, which failed to deliver the reserves required to satisfy the company's forward sales commitments, are likely to fetch only between $70million and $80million from junior exploration groups.

Sons of Gwalia's tantalum mines at Greenbushes and Wodgina in WA may be worth between $300million and $680million, according to analysts, but may only attract one or two interested buyers. Goldman Sachs JB Were analyst Ian Preston values the gold assets at $71million and the tantalum assets at $683million.

Potential buyers of the tantalum mines include the world's two biggest producers after Sons of Gwalia, Germany's HC Starck and the US's Cabot Corp.

Paterson Securities analyst Hayden Bairstow said the assets were worth only about $300million, "assuming steady tantalum prices".

Sons of Gwalia was placed in voluntary administration on Monday after the directors were forced to accept that the gold mines would not profitably produce enough gold in the next few years to meet the company's gold hedging commitments.

Sons of Gwalia managing director John Leevers said yesterday the company would keep its tantalum customers informed of the situation. The company had proposed a six-month financial standstill deal to the group's 12 hedge book counter-parties, he said.

The company had called in administrators after "the board had set a deadline for a response from all the banks [to the standstill deal]," Mr Leevers said. "Some banks had said 'yes, we're ready to go'; some were still working on it but had generally indicated that they were viewing it positively.

"A couple of smaller ones said they weren't happy. We felt that was a manageable situation but it was when one of the major ones said they weren't prepared, under any circumstances, to accept the standstill for six months, that we proposed what has crystallised the position."