Analysts expect small-to-medium-sized companies to pick over the best morsels of Sons of Gwalia’s gold business, after the State’s biggest gold miner was forced to call in administrators Ferrier Hodgson earlier this week.
In a statement SOG said a recent review of operations raised concerns about the company’s ability to meet its gold hedge book commitments.
It also said Ferrier Hodgson would work with the SoG board to develop a restructure plan for the company that would likely involve the sale of the gold business and the recapitalisation of the company’s tantalum business.
SoG managing director John Leevers said the company had received approaches about the sale of its gold business since August 30 and while he did not say whether the company’s tantalum business was for sale, he said it was immensely sellable.
“We get approaches all the time about the [tantalum] business,” he said.
However, analysts expressed little confidence about the sale of the gold business, which last year produced 512,000 ounces. They were also surprisingly down beat about the appeal of the tantalum business.
The gold business has three key gold producing regions – Leonora, Southern Cross and Laverton.
Paterson Securities analyst Hayden Bairstow said one of SoG’s tantalum customers, the US-based Cabot Corporation, might be interested in the tantalum business. However, he said he could not speculate on who would purchase the gold assets because the administration could result in a range of scenarios.
Mr Bairstow said while most would look at parts of the tantalum business, if it went at a fire sale price it would be much harder to sell.
Hartleys head of research Kevin Tomlinson was more upbeat about SoG’s tantalum assets, saying they could attract a lot of interest from the company’s customers or even Chinese buyers.
He said SoG’s exploration assets around its Southern Cross operations might be of value.
Mr Tomlinson said a specialist South African underground miner such as Durban Roodepoort Deep could be interested in parts of the company’s Laverton operations.
He said other companies in the Laverton area such as Relode, Midas or Placer Dome might also be interested in some assets.
An analyst who did not wish to be named also identified large South African miners with gold infrastructure already in WA as potential buyers of SOG’s gold assets.
