Strong rand keeping Sallies fluorspar mine closed

Nov. 30, 2010 - The strong South African currency position is precluding the JSE-listed Sallies from resuscitating its fluorspar operation, which is costing R2,5-million a month to keep on care and maintenance, Sallies chairperson Nicholas Davidoff reports.
South African fluorspar producer Sallies stopped production at its Witkop mine in June 2009, citing a collapse in demand for acid-grade fluorspar amid the global economic slowdown.
Davidoff, of Firebird Management LLC in New York, describes current fluorspar prospects as being "quite robust".
Firebird personnel who visited the annual fluorspar conference in Mexico City came away with "cautious optimism" on the fluorspar outlook.
The possibility of nuclear having a pricing upside is seen as "quite real", given fluorspar's link to uranium enrichment.
Firebird holds 66% of the Sallies shares, diluted from a previous position of 79%.
Davidoff continues to have a positive view on South Africa.
"It's a great investment destination, but I don't have a view on what the rand will do now or in the future, so we'll just sit tight and see what happens," he says.
Sallies, which has historically been dependent on the rand/US dollar exchange rate as well as the US dollar price of acid-grade fluorspar, declines to divulge the rand price of acid-grade fluorspar that will trigger the reopening of the mine, as it deems such information as "competitive".
"Certainly, the asset is costing us money, so it's in our interest to put it back into production as soon as is economically possible, but the world moves at its own pace and the economics will dictate," Davidoff adds.
Davidoff says that Firebird traditionally makes "very long-term investments".
The company describes itself on its website as being a manager of nine funds dedicated to equity investment in emerging markets, with an emphasis on the former Soviet Union, emerging Eastern Europe, and exotic sectors worldwide.
While Firebird invested in Sallies to gain access to fluorspar, the annual general meeting was asked whether the company had made any progress in developing rare earths as a coproduct credit, given the 700% jump in the prices of rare earths.
New Sallies GM Gavin Clarke responded that the development of the monazite-associated rare earths continued to be more academic than commercial.
Sallies financial director and COO Patrick Cooke said that the company has signed two orders to sell the acid-grade fluorspar that it had available at the end of last year.
"We put the plant into production to produce additional acid-grade to fulfil those orders," Cooke says.
The one acid-grade product has been sold through an agent and the other is going to the United Arab Emirates.
Clarke, who was employed at the Vergenoeg fluorspar-mining operation from 1986 to 1999,said that care-and-maintenance personnel are currently carrying out plant and crusher refurbishment in preparation for the mine returning to operation.