SGW sons of gwalia limited

Tantalum woes SGW ATE GIP HDN etc...

  1. 13 Posts.
    SGW's recent price slide (notwithstanding its recent comeback) is being partly blamed on the recent legal action brought by Cabot Corporation against Vishay, the USA's biggest tantalum capacitor manufacturer (Trevor Sykes Fin Review last weekend).

    Cabot is SGW’s core buyer of Tantalum and SGW has very generous (relative to current Tantalum spot prices) take-or-pay Tantalum supply agreements with Cabot

    The case relates to Vishay’s reluctance to fulfil its own Tantalum take-or-pay agreements with Cabot.

    Cabot is also taking legal action against others with a similar reluctance to purchase Tantalum products from Cabot (Fin review Wednesday last).

    Amongst these other companies is Kemet Corporation, another large Tantalum capacitor manufacturer, which, according to Cabot is refusing to take up 80,000 pounds (approx. 40 tonnes) of the Tantalum stuff. (Enclosed DJW article below).

    The numbers seem to be adding to quite a large amount of Tantalum that nobody seems to want.

    The court cases between Cabot with other buyers also seem to be multiplying and, therefore, can't be dismissed as an isolated events.

    Interestingly, beyond the issues of contract disputes between Cabot and its buyers I have noted, over the last couple of months, a number of significant reports referring to new Tantalum alternatives coming to the fore.

    These Tantalum alternatives, namely Niobium and Aluminum-doped Polymers, are projected to be considerably cheaper than Tantalum, even at the currently depressed prices for Tantalum ore.

    Kemet has indicated a push into the Niobium alternatives and this might be one of the two key issues that motivate Kemet's and Vishay's (amongst others) reluctance to take-up their contracted Tantalum supplies from Cabot.

    The other reason is, of course, the vast oversupply of Tantalum in the face of declining demand.

    With specific reference to Sons of Gwalia (SGW), this issues begs the question as to Cabot's ability to maintain its take-or-pay agreements and payments to SGW given that Cabot's two large customers for Tantalum (Kemet & Vishay, amongst others) are backing off their own take-or-pay agreements with Cabot.

    After all, if Cabot ain’t getting paid and are building a large stockpile of Tantalum on top of already existing large stockpiles of the Tantalum that many key buyers don’t want how can Cabot maintain their generous payments to SGW and other Tantalum miners.

    SGW recently released a statement confirming Cabot’s commitment to the agreements but one has to start worrying when companies are forced to issue these “comfort” statements…remember Enron..HiH..OneTel..etc…

    Could we possibly see an announcement soon that Cabot will default on its agreements with SGW???

    The implications of the Tantalum market collapse, if this were what we are witnessing, would have significant implications for other "Tantalum Play" companies and include:

    AUSTRALASIAN GOLD MINES NL (ATE)
    GIPPSLAND LIMITED (GIP)
    HADDINGTON INTERNATIONAL RESOURCES LIMITED (HDN)

    amongst others...

    ATE recently announced Tantalum sales at “spot” prices. Other “long-term” agreements have been flagged. It will be interesting to see what price is achieved.

    HDN sells Tantalum to SGW (estimated sales at approx. US$30+ per pound…in turn SGW sells to Cabot at an estimated US$60+ per pound…nice margin if you can get it…)

    GIP, is currently conducting a BFS on an Egyptian Tantalum deposit and recently raised around $700K (of $1.2 million ask) at 12 cents per share (shares now at 8 cents…ouch!)

    Interestingly, ATE, recently bought back shares in a subsidiary (Tantalum Australia Pty Ltd) from Kemet

    Also Sons of Gwalia recently sold out its stake in HDN

    Maybe Kemet and SGW could see the writing on the wall...

    My view is that there is a major shift in the Tantalum market, primarily driven, in the short term, by weak market conditions in the IC sector.

    Prices are also likely to remain under significant pressure given the train wreck around Cabot’s woes with its customers.

    Quite frankly I don’t believe any of the estimates from a number of so-called “experts” in this field who predict growth in demand for Tantalum at 10%+ per annum…maybe they should be directed to phone Cabot for an update…

    But more ominously to these Tantalum companies; there is a major push towards alternatives which may sideline Tantalum, to a minor role on the sidelines.

    DISCLOSURE: I don’t, nor ever have owned shares (nor want to) in any of the companies mentioned

    Tachion

    _____________________

    KEMET ARTICLE

    Kemet Sued by Cabot Corp Under Tantalum Supply Pact


    DOW JONES NEWSWIRES

    GREENVILLE, S.C. -- Kemet Corp. (KEM) said it was sued by Cabot Corp. (CBT) in Superior Court in Massachusetts regarding its supply agreement with Cabot for tantalum powder, ore and wire.

    In a press release Monday, Kemet said that the action arises out of a tantalum supply agreement signed by Cabot and a Kemet unit in December, 2000.

    Kemet said the complaint seeks unspecified damages relating to an alleged repudiation of the agreement to buy 80,000 pounds of tantalum ore during 2002.

    The suit also seeks to require Kemet to buy the contracted products at regular intervals throughout the year, to specifically identify products that it intends to buy under the agreement and to inspect products as they are produced by Cabot.

    The agreement requires Kemet's unit to buy, and Cabot to sell, certain specified amounts of tantalum powder and tantalum wire in 2001 through 2003, and tantalum ore in 2001 and 2002.

    Earlier Monday, Vishay Intertechnology Inc. (VSH) said it was sued by Cabot for allegedly failing to buy the minimum amount of tantulum powder and wire under their agreement.

    Kemet produces capacitor systems and uses tantalum products to make its tantalum capacitors.

    Company Web site: http://www.kemet.com

    -James McDermott; Dow Jones Newswires; 201-938-5400

    Updated April 15, 2002 2:58 p.m. EDT

    The Kemet announcement is on the following Link:

    http://www.kemet.com/kemet/web/homepage/kechome.nsf/vabypagename/new200212

 
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