shares mag write up - set to rocket, page-62

re: can it beat oxr's production rate??????? looking bck to:
March 17, 2005


$38m clean-up cost in Gwalia gold deal

JOHN PHACEAS



Saint Barbara Mines will have to cover environmental liabilities of at least $38 million if it completes the acquisition of failed miner Sons of Gwalia's crippled WA gold business.

St Barbara yesterday confirmed WestBusiness' report that it was in talks to buy Gwalia's gold business "on an exclusive basis, subject to conditions" with administrators Ferrier Hodgson and sale adviser Macquarie Bank.

"No transaction agreements have been entered into (but) the company will inform the market of any change to the exclusivity status and/or the outcome of the negotiations," the company said.

The deal, expected to be completed early next week, will be St Barbara's biggest step since new chief Ed Eshuys replaced ousted former leader Stephen Miller last July. Gwalia's gold division includes the operating Marvel Loch and Golden Pig mines near Southern Cross, the Carosue Dam mine near Laverton and the mothballed Tarmoola and Sons of Gwalia operations near Leonora.

St Barbara's confirmation followed a stock exchange query about WestBusiness' report yesterday which sparked heavy trade in St Barbara shares and pushed the stock almost 10 per cent higher, or 0.6¢, to 7.2¢.

St Barbara's confirmation that it was in "exclusive" talks for the gold business was slightly at odds with comments the previous day by Ferrier Hodgson that the administrators were "in discussions with a number of bidders".

St Barbara's exclusivity agreement is believed to have surprised the other potential bidders who had hoped to snare different parts of the business.

Melbourne-based Saracen Minerals, led by former Burmine director Guido Staltari, had been seeking to acquire Carosue Dam, while fast-growing gold miner Troy Resources is understood to have been seeking Gwalia's Marvel Loch assets.

Troy is Gwalia's joint venture partner at the nearby Cornishman project.

Though more than 30 companies originally expressed interest in Gwalia's gold assets, St Barbara is understood to have been the only group willing to make an offer for the division as a whole.

Saracen and Troy are also believed to be the only companies to have made substantive offers for major parts of the business.

Bidders are understood to have been discouraged by the scale of a shortfall in gold reserves which triggered Sons of Gwalia's $900 million collapse last August, and the division's massive environmental liabilities.

Sources close to Gwalia last night confirmed environmental bonds attached to the gold division alone totalled around $38 million.

A detailed audit by a third party also estimated total clean-up costs around $65 million. It was also confirmed that the main pit at Marvel Loch was being monitored closely after some minor wall instability two weeks ago.

It is not yet known how much St Barbara has offered to acquire the gold assets, though it is understood to be negotiating a debt facility to complete the deal and fund its obligations.

Mr Eshuys declined to comment yesterday on St Barbara's funding plans or how long the company had been in exclusive talks with the administrators.

Though it produced 521,000 ounces last year, Gwalia's gold division collapsed after an internal review uncovered a big shortfall in reserves, especially at its main Marvel Loch mine.

Unable to cover its loss-making gold hedging commitments, Gwalia was forced to call in administrators when its bankers refused to grant a six-month debt standstill.

























© 2005 West Australian Newspapers Limited
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