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Tantalum son set for comeback

DIGITAL cameras sold well at Christmas, perhaps it’s time to take a fresh look at Sons of Gwalia.

What’s that, you can’t see the connection? Easy really, digital cameras share a few common components with mobile phones, including the use of tantalum capacitors – and global demand for tantalum is the key to the keenly-awaited revival of a company which was once an Australian investment favourite.

Go back a few years, to the last tantalum boom of 1999 and you will find that it was demand across the electronics industry, especially for phones that drove tantalum demand and lifted SOG’s share as high as $10. It was the tech wreck which followed, coupled with troubles in the company’s gold division that caused the stock to crash to a lowly $1.32 on February 21 last year.

The climb out of its self-dug hole to around $3.80, has been painful for everyone. Casual observers winced as the founding family, Peter and Chris Lalor, flailed about, cutting costs, dumping staff, and re-capitalising the business. Even after raising a remarkable $63.6 million from the sale of 19 million shares at $3.35 in October, it seemed the worst was over though there have been continued mutterings from serial doubters about the need for more asset value write-downs on exploration properties.

Perhaps there is more bad news to come, however, that will be the job of someone new with the Lalor boys flagging their intention to step down in April following the appointment of a new chief executive in John Leevers and the nomination of a new chairman in Neil Hamilton.

Those changes at the top, important as they may seem, are flimflam. The real game is all about sales, profits and dividends – that’s why digital cameras and the Japanese semi-conductor industry is the key to SOG’s continued revival.

And once you look beyond personalities you find a seriously interesting, even optimistic picture best demonstrated in a late December report from Tokyo.

According to a survey by the Nihon Keizai Shimbun newspaper the semi-conductor and electronics component sector is booming. “Back to around the 2000 peak,” is one comment from a senior executive of NEC Tokin Corporation, a major user of tantalum, which has peculiar properties making it the best metal for switching electronic signals in small devices.

There will be a lag between demand in the electronics industry and higher sales of tantalum. Global stockpiles are always an issue when markets turn and there is no accurate measure of how much tantalum is sitting in Yokohama warehouses.

However, the spectacular success of digital photography could be just the trick SOG needs to complete its revival especially as it produces 60 per cent of the world’s tantalum.

The view of the market is that tantalum is the key to SOG.

The company’s gold division, despite the strong rise in the bullion price, remains second-rate and most of this year’s forecast pre-tax and pre-interest profit of $132 million (up 12 per cent on 2003) will come from tantalum.

The next six months promise to be most interesting for SOG.

 There is the tantalum revival, $63.5 million in fresh capital to wash away the sins of the past, a new CEO and the celebration of SOG’s 21st birthday as a listed company in May – a perfect time to complete the transition of SOG from basket case to boom stock – yet again.

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THE rise and rise of the share price of WA Newspapers has been good news for many local investors, and a marvellous example of how some companies, and their managers, can be winners from the rising value of the Australian dollar.

Since last March, WAN has risen 38 per cent from $4.78 to recent sales around $6.63, with a 52-week high of $6.70 set on January 6.

The driver, apart from a strict cost cutting campaign, and signs of a modest improvement in the quality of the company’s flagship product, The West Australian, is the price of paper.

Most paper, including newsprint, is traded in US dollars and as that currency has sunk sharply lower companies shopping with Aussie dollars have had to pay less, or will when contracts are rolled over.

Then again, there may be a mystery driver behind WAN’s share price. Staff at the Quokka, a classified advertising subsidiary, are calling on a higher authority than WAN chief executive, Ian Law, when dealing with the public.

The recorded message advising how to place an advertisement ends with the words “God bless you” – which is undoubtedly a feeling Law must be experiencing as he contemplates the cool $1.07 million increase in value of his 500,000 WAN shares over the past 12-months.

God bless you is the least Ian should be saying.

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FUNNY thing this word game. Long-time listeners to the ABC have become used to unexpected arrivals in leaky boats on our northern coast being designated as asylum seekers.

That was not the case when ABC Online reported the deaths of 16 people off the coast of Spain’s Canary Islands on January 17.

Those who drowned, believed to be Moroccan, were called illegal immigrants (first paragraph, words four and five).

Perhaps something got lost in translation from the Spanish, or there really is a political agenda at play down at the ABC.

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