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The collapse in the share price of Sons of Gwalia came to a halt yesterday
as the company attempted to convince investors that tantalum demand would
recover.
In its September quarter production report, Sons of Gwalia's executive
chairman Peter Lalor pointed to a likely recovery as tantalum inventories
continued to be wound down.
``Inventories throughout the supply chain are slowly being reduced and
industry experts have indicated that as the inventory continues to decrease and
the global market recovers, demand for tantalum capacitors will recover," Mr
Lalor said.
But securities analysts argued that the 12c recovery in Sons of Gwalia's
share price to $3.12 yesterday was due more to a perception that the stock had
now been oversold.
Strangely, after having warned analysts to reduce profit forecasts because
tantalum sales would be in decline into 2003, Sons of Gwalia reported higher
tantalum sales: 465,987 pounds in the September quarter, in line with
contractual commitments.
Gold output was also up, rising 49 per cent to 131,747 ounces in the wake of
last year's $206 million PacMin acquisition. However, analysts were not pleased
to note the company was generating a margin of just $US10 an ounce after
accounting for the total cash costs of its gold production.Sons of Gwalia said
it would make a decision by the end of November on whether to purchase Nissho
Iwai's half share of the Wemen mineral sands project in the Murray Basin, which
straddles NSW, Victoria and South Australia.
However, most analysts believe Sons of Gwalia has too many financial
constraints to be able to expand its mineral sands business.
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