Lalor brothers set up their final departure

TWENTY-ONE years after establishing Sons of Gwalia, Peter and Chris Lalor are starting to prepare for a final departure.

Executive chairman Peter Lalor said this week that he and his brother Chris would step down from their board positions after a new managing director and new independent directors settle in.

Mr Lalor would not be drawn on the precise timing of this change, but the end objective is clear.

“We will get one and probably two non-executive directors, who will be independent directors,” Mr Lalor said.

“I would step down at that point, either immediately or stay in a non-executive role for a period.

“When it’s appropriate, both Chris and myself will move on.

“The timing is variable but there is no doubt there are going to be the changes I’ve been talking about.”

The departure of the Lalor brothers would signal, somewhat ironically, a final step in the company’s recovery from its woes of the past two years.

After seeing its profit plunge to $34.5 million last year and being forced to cancel its annual dividend for the first time in more than a decade, Sons of Gwalia has started to lift its financial performance.

The improved confidence was signalled by the success of last week’s $63.6 million capital raising, at a price of $3.35 per share.

The stock is currently trading at around $3.60, a long way from the $1.32 it touched in February when managing director Mark Cutifani left the business and Mr Lalor was forced to deny claims that one of the company’s bankers had withdrawn its support.

Mr Cutifani’s departure resulted in Mr Lalor adding the chief executive’s role to his long-running position as chairman, reversing his plan to wind down his involvement in the company.

“The plan we had got hijacked as a result of the problems,” he  told WA Business News.

Mr Lalor said he was aiming to recruit the new managing director by Christmas but acknowledged the board was still assessing whether the new person should have “a bent towards commercial acumen or governance acumen”.

“I think it will get more and more difficult for [mid-cap] resource companies to find chief executives with the broad suite of skills.”

Mr Lalor described the past 18 months as a challenging period.

“It’s been a battle to restructure and stabilise the operations,” he said.

“The capital raising shows that the institutions are reasonably positive but I’m not suggesting we haven’t got a lot of work to do.”

The group has substantially strengthened its balance sheet and restructured its foreign exchange hedge book.

It has also centralised management of its gold operations, resulting in substantial cost savings and, Mr Lalor emphasised, better planning and more control over capital allocation.

Brokers have mixed views on the stock, with Macquarie and Goldman Sachs JBWere, the managers of the last week’s capital raising, being among the most positive.

Profit forecasts for the 2004 financial year range from $31 million up to $36 million, while valuations of the stock are as low as $2.55.

One of the big unknowns is the tantalum market, which is critical since Sons of Gwalia accounts for 60 per cent of world supply.

Mr Lalor expects the global electronics sector to be much stronger next year, which should flow through to a better market for tantalum.

He disputed the view that gold and ‘advanced minerals’ such as tantalum do not fit together.

“I’m quite happy to run the company as a diversified business,” Mr Lalor said.

“I don’t think that’s an issue with the market, the question is whether you can add value.”

He also observed that the business structure may have discouraged potential bidders earlier this year, when the share price was near its lows.

“It was just too complicated for some. I think that is the only reason there wasn’t more interest.”

Looking ahead, the 61-year-old Mr Lalor said he wanted to remain involved in the mining industry in a non-executive role as well as continue his involvement in public policy.

He also cautioned that investors and governments must recognise the long time frame needed to discover and develop new world-class mineral projects.

“It took Western Mining 25 years, under some very strong leadership, to build an exploration culture that allowed it to find Kambalda and Roxby [Downs].

“You need to build teams with a cultural perspective and a long term view, otherwise you won’t get the great mining companies.”


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